Summer Edition 2016
How to Make Your
Profit & Loss
Statement
One of Your Most Important Management Tools
DOL ISsues final overtime rules Pg. 16
In th
i
Issuse
MRA Members Receive Restaurant Neighbor Award
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Missouri Restaurant Association
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2016
MRA SERVSAFE courses Upcoming Class Schedule
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INSIDE THIS ISSUE 16
18
28 MRA Executive Officers Chairman, Bob Luke Rib Crib BBQ President, Buddy Lahl Kingswood Senior Living Community Vice-President, John LaRocca University Club of Missouri University
7 9
Reduce Your Menu To Fuel Performance MRA Membership Award
12 15
MRA Members Receive Restaurant Neighbor Award
16
DOL Issues Final Overtime Rules
18 23
MRA Riddle
How to Make Your Profit & Loss Statement One of Your Most Important Management Tools The Missouri Kitchen Cabinet - Changing the Face of Advocacy
27
Scott Knopfel Memorial Scholarships Awarded
28 30
Comparing Your Operating Results With Your Peer Group Spotlight on Member Benefits - Nexumi Communications
ON THE COVER It is a reality of the restaurant industry that even the very best cuisine and service, though critically important, do not alone guaranty success. As an MRA member said recently, “The hardest lesson I’ve learned from this business is that even the best chef has to manage the books.” In this issue, we provide information to help restaurateurs manage the financial aspect of their restaurant, beginning with guidance on making your profit & loss statement an important management tool (page 18), and then comparing your results to your peer group (page 28). In the spring edition, MRA provided in-depth information on the long-anticipated ruling from the U.S. Labor Department directing which salaried employees are exempt from overtime pay. The DOL handed down its final rule on May 18, just two days after we predicted. See page 16 for highlights of the DOL directive. Each year, the National Restaurant Association honors a select few restaurants who go above and beyond in service to the communities in which they operate with the prestigious Restaurant Neighbor Award. Beginning on page 12, MRA proudly presents the stories of the three MRA members receiving the award for 2015. 4
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JULY 2016
Secretary / Treasurer, Herman Styles Colton’s Steakhouse MRA Executive Team CEO, Bob Bonney Director of Operations, Barb Hergenroether Executive Director GKCRA, Bill Teel Southwest Regional Director, Shelli Luke
Missouri Restaurant Association 1810 Craig Road, Suite 225 St. Louis, MO 63146 Phone 314.576.2777 Fax 314.576.2999 morestaurants.org
Letters are welcomed, but must be signed to be considered for publication. Please include contact information for verification. Reproduction of articles appearing in Missouri Restaurant Magazine are authorized for personal use only, with credit given to Missouri Restaurant Magazine and/or the Missouri Restaurant Association. Articles written by outside authors do not necessarily reflect the views or positions of the Missouri Restaurant Association, its Board of Directors, staff or members. Products and services advertised in Missouri Restaurant Magazine are not necessarily endorsed by the MRA, and do not necessarily reflect the opinions of the MRA, its Board of Directors, staff or members. ADVERTISING INQUIRIES MAY BE DIRECTED TO: Missouri Restaurant Association Bob Bonney, CEO Mobile 636.432.9506 bbonney@morestaurants.org Barb Hergenroether, Director of Operations Office 314.576.2777 | Fax 314.576.2999 bhergenroether@morestaurants.org Missouri Restaurant Magazine is published quarterly for Association members. We welcome your comments and suggestions. Email: bbonney@ morestaurants.org
March 2 - May 24, 2014
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Expert
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Reduce Your Menu to Fuel Performance By Rick Braa, CHAE
Q:
Over the last several years, my menu has continued to expand with the number of menu items. I try to cut it back a couple times per year, but every time I try to take something off the menu, guests or employees complain. What are the things to consider when scaling back the menu?
A:
Your menu is the lifeblood of your restaurant. It’s the first line of representation in your marketing message to the guest. Menus also determine workflow, inventory levels, production speed and profitability. A bloated menu is tough to read and leads to higher cost. To optimize your menu, consider the following: Reduce the size of your menu by 10 to 20 percent. Strategically reducing the menu will produce tremendous benefits on several fronts. As the restaurant business evolves and consumer preferences change, speed is one of the most important factors when choosing a restaurant in which to dine. It’s simple math. The larger the number of items on the menu, the longer it takes the guest to order. The more items, the slower the server will be at finding an item on the POS. The kitchen is slowed by preparation of more ingredients, a larger number of stations in play at execution and so on. Training time for the trainer and trainee is reduced both in the front of the house and the kitchen when there are fewer items to explain and prepare. Ultimately, the menu can become a choke point and a constraint for the smooth execution of the guest experience. If a guest can depend on a restaurant to get them in and out at the guest’s pace, frequency will increase. Repeat business is the largest driver of sales in the business. Identify items that sell well and develop menus around them. Menus are emotional, and many times what people love is not what sells. An item can be great-tasting and beautifully presented yet fall far short on sales. Study menu item counts and find the items that sell. Stick to the data that supports carrying a menu item.
Use the seasons to refresh and reduce your menu. While this seems contrary to menu reduction, each season represents an opportunity to change things up as well as adjust pricing where necessary. Some items won’t sell as well seasonally. For example, salads and seafood sell well in the summer; meat sells better in the fall and winter. Use this time to reduce items out of season and only bring items back that sell well. Avoid too much external influence. Be leery of changing your menu in response to articles on how menu choices are changing. The industry is made up of many independent and chain restaurants, and many reported trends are simply the large chains trying something new or vendors trying to sell more of the same product. Large companies have wonderful research departments that influence their menus with their findings, but this is done carefully and slowly. Notice trends published by credible sources, like the NRA’s Annual Culinary Forecast, and consider carefully, only responding with what makes sense for your brand. Guests are also a source of influential noise. It’s important to take their input and consider what makes sense, but ultimately, the guest is looking for a restaurant that is inspired. Reduce and use the menu to smooth efficiency of the guest, front of the house and kitchen, and you’ll see higher sales, improved profitability, better service and a better guest experience. For more information on improving profitability and driving performance, contact AMP Services at rbraa@ampservices.com. Rick Braa is the co-founder of AMP Services, an accounting and consulting firm specializing in helping companies grow profitability.
The Missouri Restaurant Magazine
7
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MRA Membership Award Mark Widmann – Randall Gallery & The Bluffs on Broadway The MRA membership award was created to recognize the person who recruited the largest number of new members during the year. The winner of the 2015 award recruited 20 new members. Mark Widmann is the owner of The Bluffs on Broadway as well as Randall Gallery. He and his girlfriend, Christine Francis, enjoy patronizing the restaurants in their south St. Louis City neighborhood. It would not be unreasonable to view them as a one-couple stimulus program for St. Louis restaurants. Some of the best restaurants anywhere, they will tell you, are only a short drive away. That’s convenient; they simply cannot wait for the fun to begin.
(L to R): Joe Wand, Sales Director; Troy Gardner, Executive Chef; Mark Widmann; Debbie Coleman, Office Manager. All three have worked for Mark for more than three decades.
Mark is a lifelong resident of south St. Louis. The fifth of Dick and Gwen Widmann’s nine children, he is a 1972 graduate of Woodward Elementary and matriculated at Grover Cleveland High School, receiving his diploma in 1976. Mark began working at the Jefferson Avenue Boarding House Restaurant while in high school. He was paid $1.60 per hour to start. While working at the restaurant, he decided the foodservice industry was the right career choice for him. With a commendable amount of hard work and time management, he worked his way up to general manager at Jefferson Avenue Boarding House while earning his degree from the Hotel & Restaurant Management Program at St. Louis Community College at Forest Park. In 1978, he graduated with honors. Widmann had considerable motivation to keep his grades up. He was attending Forest Park on an MRA scholarship. The scholarship process was different back then. Mark paid his tuition up front with personal money and then brought his report card to the scholarship committee after the semester concluded. He knew a spot on the honor roll would earn full reimbursement of tuition and fees from the committee, provided he continued to work at least 35 hours a week in the restaurant industry. Widmann faithfully met both requirements and therefore attended college for free thanks to MRA’s Greater St. Louis Chapter. He repaid the favor in 2015. Commenting on the membership award Widmann stated, “I look back on the opportunity MRA provided to me after high school, and I still find it amazing that a group of people would be so
“
Mark Widmann – Randall Gallery & The Bluffs on Broadway
Every restaurant owner should be aware that MRA is still providing scholarship opportunities today – just as it did for me exactly 40 years ago. ~ Mark Widmann
”
generous to a young man they didn’t even know. Being a member of the Missouri Restaurant Association is an easy decision for me, and recruiting fellow members is a natural extension of that. Every restaurant owner should be aware that MRA is still providing scholarship opportunities today – just as it did for me exactly 40 years ago.” In 1979, Mark went to work as general manager of BFL Catering, where he stayed for five years before leaving in 1984 when he bought his own business. Widmann became the owner of Randall Gallery in 1992. Randall Gallery is a unique event facility combining the history and charm of an exquisitely restored Civil War era building with fine dining and contemporary works of art. Under his leadership, the facility has received numerous awards from The Knot, Bride’s Choice, and the Wedding Wire. Each event at Randall Gallery receives the personal attention of an owner/operator and enjoys the privacy that comes with being the only function in the house. Consistent with his fun-loving personality, Mark works to ensure no attendee at an event held at Randall Gallery is bored. Reviews by 66 former guests on the review site Wedding Wire, rate Randall Gallery a near-perfect 4.9 out of 5.0. In 2004, Mark opened a sister facility, The Bluffs on Broadway. The Missouri Restaurant Magazine
9
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GREA TE R
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ati
100
YEARS ona
ION AT CI O
Greater Kansas City Restaurant Association Centennial Anniversary
ITY RESTAURAN SC T SA AS N A S K
Missouri Restaurant Association & Greater Kansas City Restaurant Association Inaugural Gala
irthplace ion B l Restaurant Associat 1916-201 6
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MRA Members Receive Restaurant Neighbor Award The Restaurant Neighbor Award was created through the joint efforts of American Express, the founding sponsor of the award, and the National Restaurant Association. The award recognizes a select few of America’s restaurants who go above and beyond the call of duty in service to the communities in which they do business. Each year, fewer than 100 restaurants in America receive the Restaurant Neighbor Award. MRA is pleased to learn that three of its members were selected to receive this prestigious award for 2016. We proudly present the stories of their commitment to community service.
Iron Barley Eating Establishment • Tom and Gen Coghill Iron Barley opened for business in May 2003 at 5510 Virginia in South St. Louis city and quickly earned a reputation as one of the finest restaurants in the metro area. Tom and Gen Coghill appreciate the opportunity Iron Barley provided to work with their sons, Thomas, Charlie and Patrick. They are also thankful the restaurant has allowed them to help the less fortunate in the community. Service to others is something they take very seriously. For the past eleven years, Tom and Gen have held Tomato Fest to support the mission of Lift for Life Gym. LFLG exists to offer at-risk St. Louis city children a safe, enriching environment in which to strengthen their bodies, enrich their minds, develop healthy social relationships, and learn to make positive life choices. From its beginnings as a simple weightlifting program in 1988, LFLG has grown into a full service youth activity center offering services designed to alleviate the burden of poverty and build a sense of resiliency that will help them achieve success personally, academically, and professionally.
Tomato Fest is held each summer when locally-grown tomatoes ripen. At the event, food that features tomatoes as a prominent ingredient is sold to raise money for the Gym. Additional funds are raised through a farmers market featuring local produce, a crafts fair, and live auctions and raffles. The event is held on the street in front of the restaurant. All Iron Barley employees participate, as do the staff and members of LFLG. One year Tom and Gen decided to establish a world record for the largest BLT sandwich. The sandwich measured over 224 feet in length and was 17 inches wide. The bread weighed 440 pounds. The bread was covered with 110 pounds of butter and toasted with a roofing torch. Other ingredients included 600 pounds of bacon, 550 pounds of tomatoes, 220 heads of lettuce, and 60 gallons of mayonnaise. The completed sandwich weighed just 20 pounds shy of a ton. It was divided into sections and sold. Each segment consisted of 4 pounds of bread, 5 pounds each of bacon and tomatoes, 2 heads of lettuce, and a 1/2 gallon of mayo. Unsold portions were donated to Carondelet Food Pantry. Tom and Gen also feed the patrons in the VIP tent at the Micro Fest (a micro beer festival) in Forest Park, and conduct a rib competition known as Rib Off each Memorial Day. These events also raise funds to support Lift for Life Gym.
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morestaurants.org | JULY 2016
Syberg’s Restaurants • Kirk Syberg The Syberg family was destined to own and operate a group of restaurants. Rich Syberg, the patriarch of the family spent much of his career with Pope’s Cafeterias which enjoyed a notable run of success in the St. Louis area. In the evening’s, Rich worked at a grocery store to support a family that would grow to include six children. On occasion, Sally Syberg sent a child or two to work with their father at Pope’s. One can imagine the criteria Sally used to determine which of her children went to work with their father. The children, who all attended St. Simon grade school and Lindbergh High School - both in South St. Louis County, were raised in a loving and tight-knit family. With this strong sense of family, the work ethic demonstrated by their parents, and the time spent with Dad at the cafeteria, it seems logical that some of the Syberg children would enter the restaurant business. Brothers Kirk, Brett and Rick opened the first Syberg’s location on Gravois Road in South St. Louis city on St. Patrick’s Day in 1980. Today, there are seven locations. Modeling the home in which they were raised, the brothers endeavor to create in each restaurant a strong family atmosphere and sense of concern for one another. The list of organizations supported by Sybergs is impressive. Here’s a partial list: Cardinal Glennon Children’s Hospital St. Jude Children’s Research Hospital St. Louis Children’s Hospital Shriner’s Hospital Cardinal Care Hope Hospice St. Baldrick’s Foundation Angel’s Arms Toys for Tots The BackStoppers The ALS Association Stray Rescue of St. Louis
Commonly, the events and circumstances in the life of a Syberg’s team member directs the decision to add another charitable organization to the list. In 2015, the child of a long-term kitchen employee was stricken with cancer and referred to St. Jude’s for treatment. Naturally, the decision was made to hold a fundraiser during the month of October to benefit the hospital in Memphis that is leading the way the world understands, treats and defeats childhood cancer. Kirk, Brett and Rick Syberg are thankful for the success their concept has enjoyed in the 25 years they have been in business. It has allowed them to continue their support of so many worthy causes and has provided advancement opportunities for members of the Syberg team.
Many local schools Many police & fire departments The Missouri Restaurant Magazine
13
Bartolinoís Osteria • Bart Saracino Bart Saracino is a member of the acclaimed St. Louis restaurant family that now operates Bartolino’s Osteria, Bartolino’s South, and Chris’ Pancake House. He is a pastpresident of the Greater St. Louis Restaurant Association and previous recipient of its Restaurateur of the Year award. The family’s beginnings in the St. Louis restaurant community trace back to Bart’s father, Bart Sr., who came to America in 1954 from San Martino, Compo Bosso in Pinsilis, a small farming town southeast of Rome. He brought with him a suitcase of clothing, $7 in his pocket and a willingness to learn and give. All of Bart Sr.’s four sons (John, Bart, Michael and Chris) became restaurant men. From their father, the brothers learned that their customers could choose to dine anywhere. Be thankful when diners choose your place and treat them as family. It is, therefore, second nature for Bart to care for people. Bartolino’s Osteria is located inside the Drury Inn at Hampton and I-44 in South St. Louis city. In the early morning hours of January 15, 2015, Scott Knopfel, the night manager of the hotel, was shot to death during a robbery attempt. A native St. Louisan, who lived and worked in The Hill and Clifton Heights neighborhoods, Knopfel’s life was punctuated by selfless dedication and service to others. He is survived by his sister, Karen Ettling, his brother, Mike Knopfel, sister-in-law Patty Knopfel, and three nieces, Olivia, Isabella and Julia. Bart decided to do something to honor the memory of Scott Knopfel and help his family make some sense of their tragic loss. After months of planning, the result was the Scott Knopfel Memorial Dineout to raise scholarship funds for employees in the restaurant and hotel industries. With Bart’s leadership, 92 restaurants were recruited to participate in the event. Each agreed to
14
morestaurants.org | JULY 2016
donate a portion of their sales from Tuesday, November 10 to fund the scholarships. The event received extensive media coverage, including television spots from all of the local network affiliates. The first recipients of the Scott Knopfel Memorial Scholarship will be selected later this year. The sole criteria for the scholarships is current employment in a restaurant or hotel. Recipients are free to pursue the career path of their choice. Their tuition assistance will continue for up to eight semesters. “A scholarship that will allow deserving students to pursue a dream is something Scott would have supported wholeheartedly,” said Mike Knopfel, who along with Karen Ettling, assisted in the event. “It is consistent with the manner in which our brother lived his life. We can’t express our appreciation enough to Bart Saracino and the Missouri Restaurant Association.”
MRA Riddle ?
Four Clearwater High School students live on Main Street in Piedmont. Olivia lives at 57 Main. Vince lives at 106 Main. Claire lives at 151 Main. At what street address does Alex live?
SER THE VING ST AREA . LOUIS SIN 199 CE 8
Here, we customarily congratulate the MRA member providing the first correct answer to the riddle in the last issue of the magazine. However, we have yet to receive a correct answer to the riddle in the MRA Magazine Spring Issue. We hereby provide a second chance. Let us hear from you!
Name the members of the Major League Baseball Hall of Fame who spent their entire MLB playing careers with the St. Louis Cardinals or Kansas City Royals.
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The first reader to provide the correct answer to either question via email to bbonney@morestaurants.org will win a $50 gift certificate for the MRA Member Restaurant of their choice.
DOL issues final overtime rules
In the spring edition of this magazine, we provided in-depth coverage of what employers could expect when the U.S. Department of Labor issued its long-anticipated final rule directing which salaried employees are eligible for overtime. The MRA is pleased to provide the following information on the new federal wage and overtime rules.
Salaried employees earning less than $47,476 no longer exempt from overtime The final rule from the U.S. Department of Labor (DOL) directing which salaried employees are eligible for overtime was unveiled May 18, 2016. Missouri Restaurant Association advised its members previously to expect release of the rule earlier than previously indicated, possibly by May 16.
The rule became official when published in the Federal Register on Monday, May 23, 2016, and becomes effective on December 1, 2016. Vice President Joe Biden, DOL Secretary Thomas Perez and Senator Sherrod Brown (D - Ohio) unveiled the rule in a ceremony in Columbus, Ohio.
Further Compliance Guidance
The final rule is 508 pages long; however, the Administration did provide a 3-page overview that can be accessed at https:// www.dol.gov/sites/default/files/overtime-overview.pdf The matter can be further condensed to four bullet points.
In addition, Alex Passantino, a Partner at the law firm of Seyfarth Shaw and former Acting Administrator of DOL’s Wage & Hour Division, and Angelo Amador, Senior Vice President & Regulatory Counsel at the National Restaurant Association, held an excellent webinar on the final rule a few days after its release. The webinar was recorded and can be accessed on the NRA website at http://www.restaurant.org/advocacy/overtime along with the related PowerPoint deck.
The DOL Final Rule on Overtime: • Guarantees time-and-a-half pay to any salaried employee earning under $47,476 a year ($913 a week) and who works more than 40 hours in a week. • Automatically updates the salary threshold every three years, tying it to the 40th percentile of full-time salaried workers in the lowest-income Census region (currently the South). The first update would be January 1, 2020. Furthermore, the DOL projects a salary threshold of $51,000 by January 1, 2020. • Makes no changes in the duties tests used to determine whether a salaried employee above the threshold is considered exempt from overtime pay. • For the first time, allows certain bonuses and incentive payments to count toward up to 10 percent of the new salary level if the payments are made on at least a quarterly basis. 16
morestaurants.org | JULY 2016
The Administration issued a Small Business Compliance Guide that can be accessed at https://www.dol.gov/WHD/overtime/ final2016/SmallBusinessGuide.pdf.
Engagement with the National Restaurant Association The NRA would like to thank again the thousands of you who engaged through the NRA by using its “Take Action” page, attending the Public Affairs Conference, or by other means. The Administration highlighted that the Association submitted 2,648 comments. Two clear examples of the industry’s influence in the rule are highlighted in the sections dealing with the “long” duties test and the bonuses. On the “long” duties test, the rule states that the “Department understands the concerns of employers and their advocates that prohibiting managers from ‘pitching-
in’ could negatively affect the workplace.” For example, NRA stated that “Performing hands-on work at the manager’s discretion to ensure that operations are successfully run in no way compromises the fact that the manager’s primary responsibility is performing exempt work.” As to allowing bonuses, the rule states that “Commenters representing employers offered a range of reasons for generally supporting the inclusion of nondiscretionary bonuses and incentive payments… the NRA agreed that such payments are an essential part of exempt employees’ compensation in its industry.” We would urge you to stay involved as we take our next steps in our legislative and potential legal strategies. In the meantime, we will continue to provide compliance guidance.
National Restaurant Association Reaction
You need to have a plan in place well in advance of the December 1, 2016, effective date
NRA is appreciative that the DOL appeared to listen to restaurants’ concerns and did not include the burdensome “long” duties test that would have led to increased contentious disputes and litigation--something the DOL stated it wanted to avoid. However, the threshold for exempt employees in the final regulations is still too high. Restaurants operate on thin margins with small profits per employee and little room to absorb added costs. More than doubling the current minimum salary threshold for exempt employees, while automatically increasing salary levels, will harm restaurants and the employer community at large. More than 80 percent of restaurant owners and 97 percent of restaurant managers start their careers in non-managerial positions and move up with performance-based incentives. These regulations may mean that salaried employees, who have worked hard to get where they are, could be subject to becoming hourly employees once again.
Opposition will Continue The DOL moved ahead with these regulations despite widespread opposition. Hundreds of lawmakers have joined with employer and nonprofit groups in criticizing DOL for failing to accurately estimate the rule’s impact. We expect immediate legislative efforts to defund, block or nullify the rule. We will also evaluate potential litigation against the DOL over its process for issuing the final rule and some of its mandates. The NRA has been a leading force in D.C. on this matter and will continue to use all available legislative and legal options to block a damaging rule. Missouri Restaurant Association applauds the NRA for its work on this and other federal regulatory issues. Your membership in MRA includes dual membership in the National Restaurant Association at no additional cost to you. The Missouri Restaurant Magazine
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P&L How to Make Your Profit & Loss Statement One of Your Most Important Management Tools by Jim Laube
Creating and maintaining a profitable restaurant depends on successful decision-making and management of several key areas. The most commonly cited areas have to do with service, food, concept, location and cleanliness. While managing these issues is important, even crucial to the success of most operations, so is paying attention to and managing the numbers or the financial side of the restaurant. Restaurants don’t go out of business because they have slow service, a poor location or even mediocre food. Restaurants go out of business because they fail to make a profit. Being on a busy street and having great food and attentive service helps, no question; but everyone knows restaurants lacking in these areas have managed to make money and stay in business for years. Conversely, there have been scores of restaurants with more than adequate food and service, and even a prime location, that are long gone. There is one common characteristic that I have noticed from working with literally hundreds of independent restaurant operators over the past two decades. The really good ones, those who manage to be successful year after year, are not only adept at creating high standards of service and food quality in their restaurants, they also understand and pay close attention to the financial side of their business.
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L
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. . . your P&L should be able to tell you where your operational challenges are and where you need to focus your attention. -- Jim Laube
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These financially astute operators know that every decision and activity that takes place on the operational side of their restaurant is eventually reflected in their numbers and the one report that is most indicative of how well (or how bad) their restaurant is being managed is their profit-and-loss statement (P&L).
standard “one-size-fits-all” format
Your P&L should tell you whether your restaurant is profitable, if your costs are too high or if your sales are too low and whether you’re making progress or falling further behind. In short, your P&L should be able to tell you where your operational challenges are and where you need to focus your attention.
Food Beverage
Bay Street Grill Profit & LOSS STATEMENT For The Year Ended December 31, 2015 SALES
TOTAL Sales
The P&L statement reports a restaurant’s sales, expenses and profit (or loss) for a period of time, such as a month, a quarter or a year. It shows how much in sales the restaurant took in and what it cost or the amount of expenses it took to earn or generate those sales. Below is the basic formula for determining profit: Sales $ 100,000 Expenses 94,000 Net Income
$ 6,000
Sales less expenses equal profit or net income (if expenses exceed sales, then the P&L will show a loss). The goal for management is to find the most effective ways to maximize sales and minimize expenses to maximize profit or net income. If profit is insufficient, management is faced with the task of increasing sales, decreasing expenses or both. The P&L should provide management not only with the bottom-line profit or loss information but be a tool to help determine the best ways to improve profitability by analyzing the statement in more detail.
Not All Restaurant P&Ls are Created Equal Some restaurant P&Ls are virtually useless as far as providing insights into how a restaurant is performing. The following discussion will show you how to turn your P&L into one of the most important tools to understand and evaluate how your restaurant is doing. Following is an example of a common P&L format that accountants often apply to many different types of businesses. Unfortunately, this format also gets applied to many independent restaurants. 20
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1,600,563.00
100.0%
COST OF SALES Food Beverage TOTAL Cost of Sales
P&L Basics
$ 1,302,156.00 81.4% 298,407.00 18.6%
GRoss Profit
417,992.07 26.1% 83,113.21 5.2% 501,105.28
31.3%
1,099,457.72
68.7%
Expenses Advertising Bank Charges Building Repairs Cash (Over)/Short Cleaning Supplies Complimentary Meals Coupon Discounts Credit Card Charges Depreciation Electrical Equipment Repairs Exterminating FICA & Other Taxes Gas Group Insurance Interest Kitchenware Laundry Miscellaneous Music & Entertainment Music Licensing Other Operating Expenses Paper Supplies Payroll Postage Printing & Office Supplies Professional Fees Promotions Property Insurance Real Estate Taxes Rent Serviceware State Franchise Taxes Telephone & Fax Trash Removal Uniforms Workman’s Compensation TOTAL Expenses Net Income Before Taxes
12,943.80 0.8% 458.80 0.0% 3,405.00 0.2% 755.28 0.0% 9,215.70 0.6% 10,574.82 0.7% 7,849.00 0.5% 26,889.12 1.7% 29,761.90 1.9% 28,101.60 1.8% 5,348.47 0.3% 1,250.47 0.1% 40,824.91 2.6% 6,578.50 0.4% 9,474.00 0.6% 43,430.80 2.7% 9,941.80 0.6% 13,415.58 0.8% 5,949.60 0.4% 10,458.80 0.7% 3,915.80 0.2% 9,463.68 0.6% 15,215.74 1.0% 420,875.40 26.3% 938.84 0.1% 5,487.10 0.3% 11,582.60 0.7% 3,689.40 0.2% 27,859.00 1.7% 48,258.80 3.0% 149,589.04 9.3% 7,305.69 0.5% 8,439.00 0.5% 5,881.80 0.4% 6,576.00 0.4% 5,124.80 0.3% 21,885.52 1.4% 1,028,716.16
64.3%
$ 70,741.56
4.4%
Let’s assume that the above numbers are accurate. The various accounts may appear to be logically organized, beginning with sales, and then cost of sales, followed by the remaining expenses listed in alphabetical order. The operator learns the net income for the period but, unfortunately, little else.
Some of the main shortcomings of this standard “one-size-fits-all” format include: • The cost of sales percentages is expressed as a percent of “total sales,” not as a percent of the corresponding sales category. For example, food cost is not 26.1 percent as the P&L indicates. Food cost as a percentage of food sales is 32.1 percent. Likewise, beverage cost is not 5.2 percent; rather beverage cost, as a percent of beverage sales, is 27.9 percent. The costs of sales percentages should be presented on the P&L like this: COST OF SALES Food Beverages
$ 417,992 32.1% 83,113 27.9%
TOTAL COST OF SALES $ 501,105
31.3%
• “Expenses” are not grouped or categorized in any logical or meaningful manner. Rather, the expenses are listed in alphabetical order. This makes it impossible to quickly see important expense categories like marketing, utilities and payroll.
• Prime cost is not a separate line item on the P&L. One of the most important numbers on any restaurant P&L is prime cost. Prime cost is the total of cost of sales plus all payroll-related costs including management salaries, hourly staff and all payroll taxes and benefits. Prime cost is a crucial number because it includes the most volatile expenses in virtually any restaurant and comprises up to 90 percent of the costs that are actually controllable by management in the short term. • It would be difficult to compare the results of this restaurant with another restaurant or with industry averages or standards. Comparing the operating results of a restaurant against industry averages or standards is usually a very valuable exercise for most operators. It can quickly highlight where the restaurant is performing acceptably or negatively relative to other restaurants and quickly identify potential problem areas. Using this type of P&L format makes it impossible to quickly and easily get a sense of how this restaurant is doing compared with other operations. (continued page 24)
Cost of sales 31.3%
Expenses 64.3% Net income before Taxes 4.4%
standard “one-size-fits-all” format
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The Missouri Kitchen Cabinet
Changing the Face of Advocacy By Jennifer Fox - Senior Coordinator, Political Advocacy and Grassroots National Restaurant Association
restaurantsdecide.com The Missouri Restaurant Association (MRA), in partnership with the National Restaurant Association (NRA), recently launched the “Missouri Kitchen Cabinet”, a new initiative aimed at highlighting the positive impact restaurants have in their communities. Given the harsh legislative and regulatory environment the industry sometimes finds itself in, it is vital to remind elected officials of the great work our restaurateurs do every day. This initiative is aimed at changing the narrative. The Kitchen Cabinet is composed of restaurant operators, employees and supporters committed to growing and preserving industry opportunities. For the MRA, the initiative helps showcase the good work restaurants do locally. From partnering with school programs to working on philanthropic projects with local institutions, restaurants are more than just a place to eat good food. In the few short months since its inception, the Kitchen Cabinet has begun to make its mark on the St. Louis community. In January, sections of St. Louis City and County were devastated by flooding. Kitchen Cabinet members saw the opportunity to assist county executives and provide community support. Working with the Emergency Operations Office and the American Red Cross, five restaurant brands fed emergency volunteers during the crisis. The county executive publicly recognized the brands that participated as well as the MRA. This small action gets at the heart of what the program is about ‑ changing the face of the industry. Restaurateurs should be seen as the problem solvers, not the problem. In May, the MRA sponsored a Missouri NAACP welcome event for Rod Chapel, its newly-elected statewide president. The MRA and members of the Kitchen Cabinet attended the celebration, which introduced Chapel to the local community. More than 100 people gathered to meet the incoming president and his executive team, including elected officials, business leaders and restaurant industry representatives. The event was a great example of the Cabinet identifying new partners in the community.
The program in St. Louis proved so successful that we are starting another chapter in Kansas City. Interested in getting involved? Contact MRA CEO Bob Bonney at bbonney@ morestaurants.org for more information. How else can you make a difference? The 2016 presidential election is just months away and the stakes for our industry have never been higher. On the campaign trail, many of our top issues have been topics of discussion among the candidates, from immigration to labor policy to health care and taxes. Those issues broadly impact restaurant businesses, their employees and the national economy. We continue to experience legislative and regulatory challenges at all levels of government and must increase our influence and engagement in the political process to help policymakers appreciate the economic impact of our industry. We are the nation’s second largest private sector employer, and it is time legislators understand the importance of our industry. Get out and vote. It’s more important than ever before! Visit the Kitchen Cabinet at restaurantsdecide.com to learn more about this important program, register to vote and receive voting reminders.
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An Industry-Standard P&L Format Now let’s recast the numbers from the P&L above into what I’ll call a “restaurant industry-standard” P&L format: • Prime cost.
Restaurant Industry format
First, notice that payroll costs have been grouped and prime cost has been calculated and is highlighted just below the payroll category. For reasons already mentioned, all restaurants should keep close watch on their prime cost. For most table-service restaurants, the goal should be to keep prime cost at or below 65 percent of total sales. In a quickserve restaurant, prime cost should be kept at 60 percent of sales or less. As prime cost exceeds these percentages, the chances of generating an adequate bottom-line profit, in most restaurants, become increasingly difficult.
Bay Street Grill Profit & LOSS STATEMENT For The Year Ended December 31, 2015 SALES Food Beverage
$ 1,302,156 81.4% 298,407 18.6%
TOTAL Sales
1,600,563
100.0%
COST OF SALES Food Beverage
417,992 32.1% 83,113 27.9%
TOTAL Cost of Sales
501,105
31.3%
1,099,458
68.7%
Salaries & Wages Employee Benefits
420,875 72,184
26.3% 4.5%
TOTAL Payroll
493,059
30.8%
Prime Cost
994,164
62.1%
GRoss Profit
• Expense categories. As you work your way down the P&L you’ll see that the various operating expenses have been grouped into categories such as direct operating expenses, marketing and utilities. A more detailed report would also be available to show the balances in the individual accounts that are included in these summary categories.
Payroll
Many operators like to receive a summary version of the P&L so they can quickly scan the key numbers and get a sense of how the restaurant performs. Some operators only delve into the numbers further if something doesn’t make sense or appears to be out of line.
Other Controllable Expenses Direct Operating Expenses Music & Entertainment Marketing Utilities General & Administrative Expenses Repairs & Maintenance
70,941 4.4% 14,375 0.9% 35,057 2.2% 41,256 2.6% 57,856 3.6% 8,833 0.6%
TOTAL Other Controllable Exp. 228,318
14.3%
Controllable Profit
23.6%
378,081
Occupancy Costs Rent Property Taxes Other Taxes Property Insurance
149,589 9.3% 48,259 3.0% 8,439 0.5% 27,859 1.7%
TOTAL occupancy Costs
234,146
14.6%
Operating Income
143,935
9.0%
Interest Depreciation
$43,431 2.7% 29,762 1.9%
Income Before Tax
$ 70,742
OTher Expenses 19.2% Cost of sales 31.3% Other Controllable ExpEnses 14.3% Prime Cost 62.1%
4.4% income before Taxes 4.4% Restaurant Industry format
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• Controllable and non-controllable expenses. There are controllable and non-controllable costs and expenses. Controllable costs are those that are deemed controllable or can be influenced to some degree by the restaurant management and staff. Non-controllable expenses include occupancy costs like rent, property taxes and building insurance as well as other expenses like interest and depreciation over which management has virtually no control or influence. • Controllable profit. Separating the controllable from non-controllable expenses makes it possible to calculate one of the more important margins on any restaurant P&L, “controllable profit.” Controllable profit is a key indicator of management’s effectiveness in managing the restaurant’s sales and controlling costs and expenses. It is the purest number to evaluate management’s effectiveness, because it reflects only those line items over which they exert any influence or control. Many restaurants that pay their managers an incentive based on financial results use controllable profit to, at least partially, determine the amount of the incentive. I’ve worked with several restaurants whose management incentive bonus kicked in whenever controllable profit exceeded 25 percent of gross sales and increased as controllable profit hit 28 percent and then 30 percent or higher. As a rule, a table-service restaurant will require a controllable profit as a percentage of total sales of 18 percent to 20 percent to have a shot at earning a respectable net income before tax. In a quick-serve restaurant, it’s usually a little higher, around 23 percent to 25 percent.
The Quicker You Can Review It, the Faster You Can Act on It Unlike a fine wine, your P&Ls do not get better with age. One trait that I’ve noticed among exceptional operators is that they get their P&Ls in their hands very soon after the end of each reporting period. It’s common for them to get at least a preliminary P&L two or three days after the period ends. The sooner you get your P&L, the more relevant the information and the faster you know if you can relax or discover that you’ve got a problem on your hands. Operators that allow their accountants to complete their financials two or three weeks after the period end up getting stale information and if food cost or operating expenses are out of line, what can they really do about it at that point? Look at how much time has passed and how much money they’ve probably lost compared with knowing about such problems 10 days or two weeks earlier. With the technology that is available today, there’s no excuse for you to wait several days to get your numbers. Here are a few thoughts on reducing the time it takes: • Make it a priority. You, the owner, have got to make getting your financial statements quickly a priority, not just for your bookkeeper or accountant but your entire organization. Accountants must have invoices, sales reports, ending inventory and other information to do their job, so it’s imperative that the restaurant managers be part of the process as well. • Get your managers and accountant together. Have your accountant make a list of all the information needed to prepare the financial statements and highlight those items that come from the restaurant (nearly all of it will). Have a meeting with your managers and accountant to determine the format this information should be in so the accountant can quickly complete the financial statements. Prepare a schedule showing what information should be routed to the accountant and when it’s due. Also, identify what manager is going to have ultimate responsibility for seeing that this gets done on time each period. • Get online access to your bank. As we discussed above, accountants will use the “bank statement in the mail excuse” for a slow turnaround. When you gain online access to your bank, usually for a nominal fee, if any, the accountant can have access to your deposit and check information daily in real time so the bank reconciliation can be completed the day after the end of the month. The Missouri Restaurant Magazine
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• Process invoices, payments and daily sales reports daily or weekly. Don’t wait until the end of the month for your accountant to begin processing transactions. • Don’t wait on missing invoices. Have your accountant create a checklist of all recurring expenses. If invoices are missing have vendors fax or e-mail invoices that you haven’t received or have your accountant book an estimate in the case of a utility or similar expense and reverse it when the invoice is received. Putting these simple steps into practice can dramatically reduce the waiting time and enhance the usefulness of your P&L and other financial reports. Napoleon said, “The right information at the right time is 9/10ths of any battle.” While managing a restaurant isn’t the same as waging war, most independent restaurant operators would probably agree that creating an adequate profit each month is nothing less than an ongoing battle fraught with fighting challenges on several fronts. The more informed you are of your constantly changing sales, cost and profit picture, the better your chances will be to identify and respond to problems and make more educated decisions concerning your restaurant. Make sure you’re getting all you can out of your P&L, one of your most important controls for guiding your restaurant to profitability and success. This article reprinted, with permission, from Restaurant Startup & Growth Magazine. Want to read more articles like this? Send an email to bbonney@morestaurants.org to receive a free 12-month trial subscription courtesy of RSG Magazine.
during the past year, missouri restaurant association and its member restaurants… Awarded 49 scholarships to students preparing for a career in the foodservice and hospitality industry Provided two years of culinary and restaurant management training to over 5,000 students in more than 100 Missouri high schools through our ProStart® School-to-Career Program Remained the leading provider of food safety education in Missouri Raised $123,000 to assist families of two Kansas City firefighters killed in the line of duty Endowed a memorial scholarship to honor a St. Louis hotel manager killed during a late-night robbery Assisted countless charities in every manner possible and in amounts impossible to know Monitored legislation in Washington D.C. and Jefferson City to ensure restaurants had a seat at the table whenever and wherever political conversations regarding restaurants took place Carried on a mission of service that began a hundred years ago in 1916 Learn more at morestaurants.org/membership/regular-member-benefits/
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Scott Knopfel Memorial Scholarships Awarded Nine Students Receive Tuition Assistance By Bob Bonney, CEO - Missouri Restaurant Association - Certified Public Accountant
Thanks to the generosity of many Greater St. Louis area restaurants, nine students will receive financial assistance as they head to school this fall. Funds for the scholarships were contributed by local restaurants who participated in the Scott Knopfel Memorial Dine-out last November 10. The restaurants contributed a portion of their sales on that day to fund scholarships for current employees of area restaurants and hotels. The total amount of the scholarships was $27,000. A native St. Louisan, Scott Knopfel spent his entire career in the service industry, including many years in the restaurant and hotel sectors. He was the Drury Hotel clerk who was shot to death while working in the early morning hours of January 15, 2015. The dedication of Scott’s brother, Mike Knopfel, and sister, Karen Ettling was critical to the success of the event. Without them, the event would have been much less than what it became. The Dine-out was initiated by St. Louis restaurateur Bart Saracino of Bartolino’s Osteria located inside the Drury. “To provide educational opportunities through scholarships bearing his name, seemed a fitting way to remember Scott’s life,” noted Saracino. A Facebook post by Mike Knopfel the day after the event exemplifies the family’s gratitude and humble spirit. “To all the family and friends who participated in Tuesday’s dine-out event in Scott’s memory – Thank you. You honored our brother, uncle, cousin and your friend. And you’re going to help someone pursue a dream and get an education. Bart Saracino, the Missouri Restaurant Association, and EnjoyALocal Restaurant put in a lot of hours behind the scenes and carried it out. They were tremendous partners. We enjoyed bouncing around to some of the restaurants throughout the day, and in visiting just a sample of the many people who participated. Seeing the photos of groups at the various venues throughout St. Louis was very gratifying.”
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You honored our brother, uncle, cousin and your friend. And you’re going to help someone pursue a dream and get an education. ~ Mike Knopfel
”
Scott Knopfel lived and worked most of his life in The Hill and Clifton Heights neighborhoods in South St. Louis. He achieved the rank of Eagle Scout as a member of Troop 158 at Holy Innocents Parish. For his Eagle Project, he mapped
a 20-mile hike through South City featuring landmarks such as Bevo Mill, Tower Grove Park, and the Anheuser-Busch Brewery. The St. Louis Area Council of the Boy Scouts officially sanctioned the trail. Scott graduated from Southwest High School where he participated in wrestling and track & field. He also played in the South St. Louis Corkball League, which was founded by his great-grandfather and included many of his extended family members. He was a longtime member of Hope United Church of Christ. During his career, Scott worked for the St. Louis Zoo, the Pasta House Company, Trans World Airlines, Enterprise Rent-A-Car, and Drury Hotels. The beauty of Scott’s life was his selfless dedication and service to others. For so many, life seemed better when you were around him. He would go to great lengths to bring a smile and provoke laughter. Simply put, Scott Knopfel’s mission in life was to leave others better and happier than he found them. Scott Allan Knopfel, the son of the late Ronald and Beverly Knopfel, was born October 4, 1964. He was shot to death while at work in the early morning hours of January 15, 2015. He is survived by a sister, Karen Ettling and a brother and sister-in-law, Michael Knopfel and his wife, Patricia and three nieces Olivia, Isabella, and Julia. Commenting on the event, Mike and Karen stated, “It meant so much to our family when Bart called to discuss the Scott Knopfel Memorial Dine-out. Scholarships to allow deserving students to pursue their dreams is an idea Scott would have supported whole-heartedly. It is absolutely consistent with the manner in which our brother lived his life.”
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Comparing Your Operating Results With Your Peer Group By Bob Bonney, CEO - Missouri Restaurant Association - Certified Public Accountant
As I frequently do during the season, I checked the Major League Baseball standings on the morning I wrote this and noted my beloved St. Louis Cardinals are winning a little more often than they are losing and are in second place in the division. There is a problem, though. The Cardinals trail the Chicago Cubs by twelve and a half games. I don’t like it, and I’m sure the ball club is focused on addressing the issue. I also saw that the World Champion Kansas City Royals have been hot, winning eight of the last ten and stand in second place in their division, just a half-game out of the lead. Though streaky thus far in 2016, I believe the Royals will be fine. I’m not sure the Cards can catch the Cubs. What does this have to do with the operations of your restaurant? Well, nothing really. The point I’m making is that both teams know where they stand versus their peers and can use that information to inform their decisions. Regarding operating results and profitability, how does your restaurant compare with your peer group? It’s easier to learn the answer than you might think, and Missouri Restaurant Association will help you navigate the process. Here’s the first step.
Step One: Utilize a Restaurant-Specific Chart of Accounts Restaurants are a unique business and should use a specific chart of accounts when preparing their financial statements. A chart of accounts designed specifically for restaurants is available for download on MRA’s website: http://morestaurants.org/guidance-for-restaurants/. To facilitate a meaningful comparison of your financial and operating data with similar restaurants, your financial statements must speak a common language. That can be accomplished only when the same chart of accounts is utilized, and revenue and expense items are recorded consistently with your peer restaurant group. The restaurant-specific chart of accounts provided for your use, and referenced above, includes an extensive chart of accounts and an account coding guide. Begin the conversion process by selecting those accounts that apply to your business. If the nature of your operation changes, accounts can be added or dropped at that time.
An apples-to-apples comparison of your financial and operating results with industry averages can indicate where your restaurant should focus to improve your bottom line.
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Restaurateurs should consider purchasing a copy of the National Restaurant Association’s all-time best-selling publication, The Uniform System of Accounts for Restaurants. The eighth edition of the book was edited and revised in 2012 by Jim Laube, Publisher, RestaurantOwner. com, and Barry K. Shuster, Editor, Restaurant Startup & Growth magazine. The book, which is 175 pages, contains a robust guide to standardized restaurant accounting, financial controls, record keeping, and relevant tax matters. The book is available for purchase from NRA’s online store: http://restaurant.org/ store/. MRA members receive a 50% discount and therefore pay just $37.50. It is money well spent.
Step Two: Utilize NRA’s Restaurant Operations Report When your financial statements are prepared in a manner consistent with restaurants of a similar profile, comparison with your peer group is possible. In fact, it’s easy thanks to NRA’s Restaurant Operations Report, the 2016 edition of which was released in May.
Compiled by national public accounting firm Deloitte & Touche LLP from information from restaurant operators nationwide, the Report provides information in four categories: • Full-service restaurants - average check under $15 • Full-service restaurants - average check $15 to $24.99 • Full-service restaurants - average check over $25 • Limited-service restaurants Some data is further broken down by: • Type of establishment • Menu theme • Restaurant location • Sales volume An apples-to-apples comparison of your financial and operating results with industry averages can indicate where your restaurant should focus to improve your bottom line. MRA members interested in this two-step process to evaluate their performance may contact me via email at bbonney@ morestaurants.org, to get the process started. That’s the one thing about numbers; you can always count on them.
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The Missouri Restaurant Magazine
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MRA Endorses Telephone Service Provider Nexumi Communications – Dependable Service at Guaranteed Savings By Bill Teel, CPA - Missouri Restaurant Association - Exec. Director, GKCRA
The Missouri Restaurant Association is pleased to announce our newest endorsed partner, Nexumi Communications. Nexumi is an internet based phone system providing a cutting edge, state of the art solution to your telephone needs. It uses the one line you definitely need to do business in this modern age – your internet connection. Nexumi handles all your web, voice and conferencing needs. Nexumi guarantees regular and allied members of the MRA that their phone bill through Nexumi will be at least 10% lower than their current bill. An average phone bill of $300 per month will save a member $360 annually. Depending on the type of system you currently have, Nexumi could save you significantly more. The MRA offices switched to Nexumi and have saved well over 60% on telephone expenses. There is no better pricing on phone service, and Nexumi is a proud supporter of the MRA.
within one business day with little or no interruption of service. You also get to keep your existing phone numbers. Nexumi’s system includes standard features that often cost extra with traditional telecommunications. Some of those include call waiting, call hold, call parking and call forwarding. Also included is voicemail with notification, teleconferencing and hold music. Many other features are also available. If you need to upgrade your phones, Nexumi can take care of that too. They carry a wide variety of phone system solutions that are both durable and deliver a high-quality sound on both headset and speaker. For more information, contact Casey Roll at (816) 206-1226 or via email at caseyr@nexumi.com.
Nexumi installation is free (excluding wiring), and it eliminates that cumbersome phone box full of wires hidden somewhere in your restaurant or warehouse. Nexumi is tied directly into your internet and requires no additional hardware. All you need is digital phones. Nexumi’s installers can usually complete the changeover
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