Adam Garfield, CPA

I met recently with a restaurant client and four of his managers to review the latest set of financial statements for each of their locations.  One of them was a bit newer than the others.  He had a very good handle on food costs, but he had been working to get his labor costs down and more in line with those of the other stores.

The owner has a bonus program in place which rewards the manager who attains the lowest percentage of combined food and labor costs over a certain time frame.  Competition between the managers is pretty keen.  It’s no ‘Glengarry Glen Ross’ or anything (”First prize is a Cadillac Eldorado.  Second prize is a set of steak knives.  Third place is you’re fired”), but the owner dangles a fairly lucrative carrot.  As a result, you might expect them to guard their cost-control and cost-cutting methods like rabid ninjas.

Actually, they do anything but.  All freely offer their ideas.

Is it Altruism?  I think that partly explains it.  They’re all good people who want to see each other succeed.  Stroking the boss?  Maybe a bit.  Selfish?  That likely plays a part, too.  Better performance from store A means more money in owner’s pocket, and an increased likelihood of a spillover effect into stores B, C, and D.  Regardless of the reasons, it pushes the notion of the benefits from sharing your knowledge.  Too many individuals in organizations, be they a local restaurant or a mega-conglomerate, protect their intellectual capital turf.  Share the knowledge.  Help your colleague.  Reap the perks.  Increase shareholder wealth being only one of them.

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Hi.  Once again I’m deferring to my friend, colleague, and business parter Rob Storey.  He has a great take on the impact of the wrong way to train and expose an employee.  It’s funny.  It’s accurate.  It does contain a swear word, although it came from the lips of Jake.  Enjoy:

I just finished up a lunch time meal at Wendys and had to wait for a while to place my order. As I stood in the queue, I watched as each “crew member” I think that is what they call them instead of exploitable pimply faced adolescents, had to alter their routine for one person - Jake.  Anyway, I watched as Jake bumbled his way through every order, every task and every movement.  Luckily he wasn’t working the till, but everything he did was a mistake.  He called out the wrong sizes of fries from the monitor, knocked over a stack of Frosty cups, yelled at the top of lungs to his manager something about the Frosty machine being “busted” and what a piece of shit it was, tried to top off a customer’s beverage with the wrong type of drink and generally got in everyone’s way.  All during the lunch time rush.  He could have contributed to the profit of the Wendy’s by just standing in a corner with a stupid pie-eating grin with his finger in his nose.  As restaurant owners, it’s critical to understand who is Jake.  Which employees disrupt the process, offend customers and generally bumble everything.  These people eat away at the profit of your restaurant every minute they are in the kitchen, taking orders or even bussing tables.  Do these people deserve to live…well, yes. Just not where your customers can see.

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There’s a scene from the movie “Toy Story” (1? 2??  Woody and Bo Peep Finally Make Out???) where Mr. Potato Head is packing for some sort of adventure.  Mrs. P helps him or, as most husbands might say, once again tries to micromanage him.   Part of that um, help includes grabbing an extra set of eyes for him, what she calls his “angry eyes.”

There’s tremendous benefit from sharing your financial statements with a select group of people, those who have an interest in the operation of your restaurant or business.  There can also be an advantage to show them to someone not involved in the operation.  While it needs to be someone who can be trusted with the financial data, giving it to a person like this might point out some issues you or another principal may have overlooked.  That extra set of eyes could find a new and useful expense category, for instance.  They could make you rethink the relevance of a component of your balance sheet.  Their questions and comments just might help you find a better way to explain the financial aspect of the restaurant to other pertinent parties that regularly review them.

So don’t be afraid to, on occasion, get some unfamiliar eyeballs taking a look at your profit and loss statement.  You may just find some unexpected but useful help.  Your significant other, perhaps.  A trusted colleague.  The guy at the bank who helped secure your build-out loan.  Your insurance agent.  The 7-11 employee who looked the other way when you sucked the top off of the slurpee and then refilled it.  Okay, maybe not that last guy, but you get the idea.  Take advantage of a second set of eyes.

As for me, I’m still rooting for Hamm and Sally (the freak-O doll that Sid morphed) to get together in the next version.

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This is a very important announcement.  More critical than ‘Jon and Kate want to suck out each others’ eyeballs’.  Bigger than ‘Balloon Boy was a Hoax.’  As vital to human life as Jalepeño Tostitos.  (Start the drum roll):  the announcement is that it is really important to communicate with people you know, and with whom you may be having conflict.  Be they friends or spouses or that client who owes you money or your kids or Aunt Mulva or traffic-ticket-giving cops (who, technically, aren’t people).  Speak with them.  Twitter them.  Ping ‘em with an e-mail.  Put ten digits together on that iPhone and press the green button.  Ring the bell.  String the can.  Buzz the tower.  Spank the monkey.  Well, maybe not that last one.

I had a client for whom I was doing some ongoing work who got into some financial trouble.  This caused the client to curtail payments to me.  I worked with the client on this.  However, I did some subsequent work for the client for which I required separate payment.  Some problems ensued with that payment.  I made repeated efforts in many of the above-mentioned ways (including, in addition, good thought osmosis and hopeful finger-crossing) to talk to the client about this.  Nearly four months went by without a peep, not even the Easter candy kind.  Ostrich heads were George Hamilton tan compared to the client’s.  Buried deep, 24/7.

What was I to think?  Did the client die?  Had they fallen, and couldn’t get up?  Rabies?  Shingles?  The heartbreak of Psoriasis?  Nah.  Maybe it was just that the client didn’t want to discuss something that had all the appeal of ipecac.

The client eventually made contact after things went further south between us.  We may yet make full amends.  Currently I’m out some money, but more importantly now I’m leery.  And sad, because it didn’t have to get to this point.

If you’ve got troubles with your restaurant manager, let him know.  Tell the store owner about the employee you used to rave about that now makes you suspicious.  Talk to your boss about the report with the chocolate smudge you submitted.  Call the IRS before the fifth notice arrives.  Speak up!  Most people are willing to solve problems, even though there may be some discomfort involved.  And by discomfort I mean stuff that might cause your sphincter to tighten up.  But fight through that and talk.  It’s worth it.

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I have a restaurant franchisee client.  He recently successfully pursued adding another location to his portfolio.  He has, in the past, used a law firm to help him in various areas as he initially purchased his franchise, negotiated lease agreements, contemplated selling, and explored expansion.  He used this same firm to help him navigate the lease agreement waters with this current location. 

I’m by no means a pro attorney guy.  We’ve all heard the lawyer jokes (my personal favorite: How do you know if a lawyer has taken Viagra?  He gets taller[rim shot].).  But I’ve seen how these law hawks have helped protect his interests.

In the case of his current expansion efforts, he was having some trouble with a couple of key elements of the lease.  All I know is it involved a lot of multi-syllable words.  As my business law teacher used to say, “Why use a small word when a big one’s even better.”  I used to think of that little gem every time one of my tax professors would use the term ‘bifurcate’.  Oh, you mean ‘split?’

Anyhoo, my client had had his lawyer review and tweak some of the language of his lease agreement.  It ended up saving him considerable build-out delays, money, and emotional headaches when the conflict with his landlord occurred.

Are they costly?  Yep, usually.  Are they pompous?  Child, please.  Will they save your legal hiney?   My client sure thinks so.

Some things are good candidates for do-it-yourself, like car oil changes, opening ketchup bottles, and washing your hair (lather/rinse/repeat).  But a good business law attorney can be well worth the cost.  A few hundred bucks now for lots of REM sleep later.  Or as my uncle, Russell L Mahan, esquire would say, “An amount equal to two (2) or three (3) hundred dollars, U.S., in the present tense, in the exchange for a large quantity of completely restful, rejuvenating, natural state of rest during which consciousness of the world is suspended.”

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Hi all.  I’m going to turn this session’s blog over to my good friend, part-time business partner (see www.vuegear.com if you’re curious), and most importantly for this, very talented marketing, ah-hem, genius.   His name is Rob Storey.  Enjoy:

The business plan that you submitted for your SBA loan to get your restaurant doors open calls for you to sell 700 Angie burgers (short for angioplasty) and you are currently selling only 350. You need more customers.  Perhaps you could increase your marketing spend from .0001 percent of gross sales to .001.  But how would you spend this deluge of dollars? What about social media?  Marketing is undergoing a dramatic shift, instead of blasting out coupons or emails to some random list, smart businesses are cultivating relationships and getting permission to talk to their customers. During these conversations, businesses learn how to improve, the freshness of the food, ambiance, price, location, etc. all the things you as a restaurant owner need to know to succeed…or at least get to the magic 700 burger threshold.

Let’s start with a couple of basics:

1. Don’t be afraid to pimp your restaurant. And by pimp, I mean talk about it. Mingle with the crowd, ask questions, get feedback.  Ensuring that every time a customer walks through your doors, their experience is great.

2. Create a Facebook page for your restaurant. It’s simple.  Ask your friends to become fans.  Get a conversation going with those that already enjoy your restaurant. This is a way to observe the coveted “Word of Mouth” marketing and more importantly influence it.  The conversation is already happening about your restaurant, join in and learn from the experience.  A word of warning on posting.  It is possible to “over share.”  Tirelessly talking about your restaurant only can get old, but mix it up with some interesting stories, personal notes and some freebies once in a while.

3. Start a blog and link to it on your Facebook page.  The set up for this is so so easy.  And is currently free.  Blogs are an opportunity to open up and share experiences, frustrations and manage the conversation in more detail.  Again, this starts with your friends and loyal customers.  Keep in mind that this takes some thought, good writing and CONSISTENCY.  Don’t expect much for a few months or even a year.  But building a valuable channel for your business works.

Hey look at that, your .001 marketing budget can go further than you thought.

Rob Storey is a managing partner at Vinca Consulting. Vinca specializes in helping early stage businesses develop marketing plans, go-to-market strategies and more effeciently spend marketing resources. Contact rstorey@vincaconsulting.com for more information.

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I’ve seen some things in my days helping restaurants.  And by things, I don’t mean what crawls around the back of the joint when the health inspector’s not there.  What I do mean is the things that get the restaurant exposed to the public.

Marketing.

I’ve seen it in all its forms, be it glorious, ill-advised, well thought out, nationally backed, stupid, inconsequential, spot on, brilliant, what were they THINKING?, edgy, and lame.  Sadly, that’s pretty much the run of my adjectives.

But the campaigns, be they hatched from cocktail napkins or handed down from corporate headquarters, are typically designed to do one thing:  get customers through the doors.

How do you market?  When?  How much do you spend?  Can you do too much marketing?  Why all the fuss about Barack’s recent school speech?  Let’s hope we can answer some of these questions in the next blog or two.  Until then, I’ve got a couple of cockroaches to scare up (here, roachy roachy roachy).

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Before I lay out the post-Schmiceberg customer service debacle (although I think debacle is a better suited term when your college alma mater gridiron team gets pasted 54-28 by a non-ranked opponent, thereby ruining any BSC hopes and kicking them right out of that seven-spot ranking), let me tell you about another eatery experience I had.

I’m at this fast food place in Green River, Utah, about 180 miles from home, returning from a trip to Colorado.  I won’t name this restaurant either, but Elaine’s boyfriend Puddy from ‘Seinfeld’ loved to eat there.  High five.  I’ve got a hankering (aren’t people from Texas the only ones to get hankerings?) for a shake.  And not just any cheap-A, glop-O-sugary-syrup-and-some-fake-flavoring shake either.  One word (three, if you’re that 2007 Miss Teen South Carolina contestant answering the question about maps):  Ja-MO-cha.  Makes a slurpee seem cheap in comparison.  Come to me you malty, vanilla-ish, hint of coffee, chocolatey goodness.

Well, I should have listened to Leo Getz.  He’s the smartest accountant/hostage/key witness ever to help Danny Glover and Mel Gibson out of a ‘Lethal Weapon’ mess.  After accompanying Riggs and Murtaugh through a food drive-through and getting his order screwed up, Leo utters a short, expletive-laden phrase that best sums up the importance of checking your contents before leaving when you dine.  Rent it if you need to.

So a couple thousand feet on I-15 later, I realize, to my ‘Saw VI’-like horror, that the place forgot to add the delicious jamocha flavoring to my shake, making it taste pretty much like wallpaper paste.  I’m committed to the highway home at this point, so I sulk, the stinging swallows of jamocha-less shake like edible, salt-laced bactine on my wounds of what might have been.

What’s a dissed consumer to do?  Gripe, of course.  Contact us links of web sites have never felt so arm-open beckoning.  I lay out my complaints to each entity and wait.

Schmiceberg responded first.  A full-tilt apology by the district manager, a complete understanding of its grand injustice, a promise to make it right, and a request get me to come back in the form of gift certificates.  When they arrived by mail, the amount was more than generous, and the letter reiterated the invite back in the e-mail response.

Puddy’s place, you ask?  I received a voice message on my work phone from a very nice-sounding female store manager, acknowledging the shake machine problem the day I dined with them, and a kindly invitation to come in for a free shake the next time I came through their town.  Great, because that’s a little more than a stone’s throw from my house.  If you throw it 6,336 times.  Fortunately for me, though, I do go through Green River about every four years.  Me plus Green River, Utah jamocha shake = LOVE in 2013.  Can’t wait.

The lesson is, overcorrect your screw-ups to your customers.  Some of them may be jerks about it (quit looking at me).   It may drive your food costs up next time they come in and unload $10-$20 of gift certificates on you.  But they’ll come back.  And they’ll probably spend more when they do, putting money in your pockets.  And they’ll likely come back again after that.  Again, more dollars for you, more goodwill, and less stories floating around about how this restaurant had the audacity to offer a dissatisfied customer one free item good at their location only which was nowhere near that person’s home.  ‘I’m thinking Schmarby’s’??  I’m thinking not.

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You know that feeling when the hottie you’ve been eyeing from a distance gets close enough to check out from HD-quality length?  And she’s got some gnarly mole the size of Pluto on her apple-like cheek?   And a lazy eye that’s always looking at Cleveland?  And lime green eyelashes?  And one pointy ear?  Well, getting hosed at your favorite restaurant is exactly like that.  Except restaurants don’t have big ol’ face blotches.  And they aren’t female.  And they can’t really see.  Or hear.  Although they do cause men of all ages to make Homer Simpson drool noises (if they have onion loaf appetizers, that is, and you know EXACTLY what I’m talking about, Tony Roma’s fans).

I was coming back from California with my family and we decided to stop to get some food.  Since I had all four of my boys with me, we logically had to stop at four different restaurants.  Grrr (and another blog altogether).  My second-oldest wanted a burger and shake from his favorite place.  I won’t name it, but it rhymes with Schmiceberg Drive-Inn.  There’s no one at the counter, only a ‘ring bell’ sign.  We ding ding ding away, and an employee shows to take my kid’s order.  Then we wait.  And wait.  And wait.  And . . . so there’s nothing like fast food that’s NOT FAST.  It seems that counter girl was pulling all duties, including cook.  And not a person in line ahead of us, or behind us.

My kid’s picky, and ordered his hamburger with ketchup only (or catsup, if you don’t know how to spell).  The employee, in an very thoughtful effort to expand my son’s eating horizons, threw some cheese and mustard on his burger to be nice.  It might as well have been ricin and anthrax to my kid.  So back we went for a new one.

This time things got good.  And by good I mean nose-hair-pulling painful.  Line of customers eight deep, the girl was still flying solo, and I’m starting to get, shall we say, bent.  However, being the courteous and respectful person that I am, I march right to the front of the line, clamp down hard on my tongue to keep the rage from seething through, and tell counter/cook/dishwasher/complaint manager girl that the burger was cooked wrong, could she please cook another, and could she please, please do it quick since we were still three hours from home and I had a van full of sons and in-laws.  And you all know how painful that can be.  Of course the sons aren’t always pleasant either. 

Well bless her heart, she was, in fact, quick.  And by quick I mean seventeen minutes forty-three seconds quick.  Seriously, we’re talking Mr. Tudball speed (see Carol Burnett Show for hilarious comedic reference).

She finally emerged from the grill area, brown paper bag in hand, exasperated but triumphant in her appearance.  I expected an apology, an excuse, pretty much any sound to come from her mouth.  Instead I got bupkis.  A blank stare as she handed it to me.  An even more blank one as I, once again very courteously pointed out to her that the 100-year war was faster than her, or and while we’re at it that watching an entire episode of those two Disney twin blond boy morons who live in a hotel with their mommy seemed quicker.

The payoff came when we get to the van and Casey opens the wrapper, finally taking a luscious bite of his ketchup-only hamburger.  It was deliciously laced with pickles.  A condiment middle finger.

How did I react, and how did the good people of Schmiceberg respond?  I’ll tell you next time.  Until then, pass the Carolina Honey sauce (cue gargle-like drool noises).

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Do I raise menu prices?  Do I shave employee hours?  Do I sell one of my cars?  Have the kid start mowing more lawns?  That’s the dilemma facing my restaurant owner client in the face of the July minimum wage increase from $6.55 to $7.25 per hour.  Maybe he won’t get a lot of sympathy for dropping his take-home from the low six figures to notably under $100K because of the wage hike (he’s still north of the average annual salary of most Americans), but he faces a real problem to combat paying out about fifty-five thousand dollars more a year in labor costs.  Change his standard of living, impact customer service, or pass the increase on to his customers?  Decisions, decisions . . ..

Turns out the company who franchises him helped make that decision for him.  While it is unclear if their actions were in direct response to the impending wage hike (the law was passed under George W Bush’s administration, so it’s been known about for some time), they slightly dropped portion sizes, effective shortly after the minimum wages increase took place.  In all likelihood, not noticed by the lion’s share of customers who passed through the doors of his restaurants.

So who ultimately paid the price for the wage hike?  Us.  His customers.  The company went to a tried-and-true method of bait-and-switch (how about that, two multiple-word hyphenations in the same sentence).  Shave the serving size so the customer doesn’t notice.  Happens with everything from Oreos to cereal to canned pineapple.  And that, as I see it, is one of the many problems with trying to level the labor playing field with enforced wage hikes.   Consumers and the general public pay for it.

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