Cost Of Goods Advice

I was looking at a restaurant blog today that had a free “Control your cost of goods checklist” offered.  I had a quick look just in case I could learn something new and was horrified to see how they suggested controlling your costs.

OK let’s see if this sends some warning bells clanging in your head!!

They suggested estimating sales for the coming week, e.g. $20,000. Then if your cost of goods needs to be at 25%, you have a budget for that week of $5,000 for food. So that’s what you spend. No more, no less!!

On Tuesday of this week my family and I stopped at our local Pizza Hut to pick up a pizza that had been ordered 20 minutes earlier and had to wait another 25 minutes until it was ready. I overheard the supervisor telling a newly arrived team member that the budget sales for the day were $1500 and that they had already done $3,000. That explained the delay and the fact that they had run out of certain sizes of dough, were making boxes as the product came out of the oven etc. Hey, we have all been there.

Now think of what would have happened if the Manager/Owner had followed the advise of the blog I have just mentioned. ‘Oops, sorry closed today due to no stock!!’

Control of COGS only comes from vigilance, weekly stock takes, and follow up with team and supervisors as to how to control costs without having a run out situation. Always have at least a week and a half stock on hand for items that are delivered once a week and similar overlap for those items delivered more or less frequently.


McDonald’s Refurb Not So New

Wow, what a lot of fuss over McDonalds new look and new technology. The trade papers have been full of potential color schemes, the lack of primary colors, screens instead of menu boards and a sit back and relax atmosphere. I am amazed at the number of writers that have jumped on the bandwagon to report on these new innovations and turn around in the strategic direction of this company.

Hang on a minute though!!

I am someone that has spent most of my last 20 years in other parts of the world and because some of those places were, shall we say, a little unhygienic, my wife and I were in the habit of visiting McDonald’s on a regular basis. Yep, we used the bathroom but didn’t eat the food. Of course all that changed when we had a child but that is another story.

Now all these visits to McDonald’s over the years has made me a bit of an expert in their décor, products, specials etc. and I will admit that I do use them as a barometer of the maturity of a market that I may have just arrived in. This goes for the more mature western markets as well, McDonalds are very good at taking ideas from their franchisees and making them work. There are always things that are market specific to whatever country you happen to be in that is interesting and sometimes a little bit quirky. Have you ever thought about what they substitute for beef in India?

I kept on getting a feeling of déjà vu as I was reading these articles and came to the realization that this is nothing new for McDonald’s, these changes are not new but a mix of all the things that have been happening around the McDonald’s world for years. McCafe has been around for years and in some parts of the world a relaxing latte in McDonalds has been a regular part of many people’s daily lives. They even have comfortable chairs that make you want to stay and have another coffee.

Many McDonalds have subdued colors in Europe and other regions. Have a look at the store in Alexandria, VA, it has had a subdued décor package for over a decade and there is one in Asheville NC. that has a grand piano!

The menu screens have also been around for years and even my local coffee shop has a couple, so how new is this strategic change in direction? For some countries not new at all would be my guess.




Pizza Franchise And Technology

I recently read an article on how much easier and cheaper it was to run an online business today than it was back at the start of the personal and business computing age. The article was well written and true (because my wife is part of the online business crowd and she told me it was true it has to be!).

I thought of the difference that the computer and modern communications has made to my business over the last couple of decades and how easy things have become for the restaurant and fast food operators and staff…..NOT.

I remember when pizza delivery was just being implemented through the Pizza Hut system and every person in the store had to be trained on how to answer the phone and take an order. There were normally six phones in every store and because we wrote the order on pre-printed order pads the orders took less than a minute to take and read back to the customer.

Now on a busy night with more than six people working back of house and with delivery drivers it normally meant that every phone was answered within three rings which was the standard that everyone worked towards.  Simple math, the ability to take over 2000 orders every hour in every store. More orders than most stores took in a week. That equals some very happy customers and there were always enough people in the store to answer all the phone calls all the time even if a driver or two had to stay behind for a couple of minutes. Now multiply that by the 120 stores in that market!!

Then in many countries they brought in a call center. In my city there were 86 computer terminals with 86 well trained telephone operators answering calls and taking orders. What they didn’t realize was that with the new computer system and the number of different permutations on a pizza and then the side orders it meant that more than one screen was used and it took a little longer. It averaged a minute and a half to take an order. No big deal? Well it was because 50% of the orders for the week came in a two hour period between 6.00pm and 8.00pm on a Saturday and Sunday. The 86 terminals could not handle those peak hours and the manager of the call center actually told me that on his busiest Saturday night he had 400 drop outs in a single minute. That is 400 customers that got tired of waiting in the cue and hung up! That equals some very unhappy customers.

To be fair to the call center not all of the orders took a minute and a half, if you were already on the customer list and wanted exactly the same as your last order it only took 45 seconds but only 25% of the orders fell into that category. Also factor in the fact that the call center had difficulty knowing how busy each store was and what the wait times were for delivery. Add to that the “where’s my pizza” problem which meant that if a pizza was late the call center had to put the customer on hold, call the store, find out what happened to the order and then pass on the solution to the customer. Another two minutes!!

Things have improved over time due to the fact that call centers for major cities have gone the way of the Dodo in most cases. Now you call your store and everything is simple. Place your order with the people who will be making and delivering it. Wow, what a simple concept!

R Stevens