Aug.
4, 2008 08:00 AM EST
Hart
Restaurant Management Cuts Food Waste and Lowers Food Cost 2.5% with RTIconnect
Software
Gary Hodge uses RTIconnect software to manage food waste and improve gross profit in his 34 Burger King restaurants.
ATLANTA — Gary Hodge runs a tight ship. As managing director of Hart Restaurant Management in Corpus Christi, Texas, he is completely focused on tracking gross profit and cutting food waste in his 34 Burger King restaurants.
In an industry that accepts food waste of one-half to seven-tenths of a percent, Mr. Hodge demands three-tenths of a percent from each of his restaurants. Translation: more profit.
How does he do it? He uses a gross profit business model (a strategy in which gross profit is the critical success factor) and he uses RTIconnect™-RTI’s back-of-house system for food, labor and cash controls, to give him the information he needs to cut waste and increase profits.
Mr. Hodge said that he chose RTI because its software offered purposeful, theoretical food costing. “The modeling that we use through RTI is—we’ve discovered time after time, audit after audit—absolutely infallible. It is absolutely rock solid,” he said.
“I was looking for a measurable, mathematical model that would allow me to track gross profit in a way that would let us capture the waste element that has always been in the food business. I believe RTIconnect—which was unlike anything I had seen—has been able to capture that.” Using RTIconnect, he said, “I've lowered my food cost 2 to 2.5%.”
The Challenge: Eliminate Excess Food Waste
Dustin Harris, IT manager for Hart, is the point man for implementing the RTIconnect controls throughout the company. Restaurant by restaurant, he systematically shows each manager how to use RTIconnect to identify problems, organize inventory, order food, and thereby cut food waste to improve gross profit.
In one high-volume store, he said, RTIconnect’s Daily Food Variance Report identified that food waste was out of control—over one percent. “We're talking about actual recorded waste, where the store says they threw away, for example, 10 or 20 Whopper® patties in one day. First, they learned that they had to manage actual waste. But aside from legitimate waste (such as food spilled on the floor), there’s that unknown, or as Gary refers to it, the ‘mystery meat’: variance after waste. One of the things that they didn't truly understand, or didn't believe, was that any variance after waste is either theft or the result of a miscount.”
For example, explained Mr. Hodge, “If there are 10 Whopper patties missing in variance and [we see] we have wasted five Whopper patties, then the ‘mystery meat’ is where's the other five Whopper patties?” Sometimes, he said, the waste “goes home.” Other times, inventory counts are incorrect.
In a business where 60 cents of each sales dollar goes to pay for labor and food, food waste is a very big deal. In the Hart restaurants, accepted waste started out at five-tenths of a percent, then moved to four-tenths, and now is at three-tenths of a percent using RTIconnect.
The software’s Daily Food Variance Report identifies the difference between ideal usage (what the restaurant should have used based on actual product sales and recipes) and actual usage (what it did use based on inventory counts, purchases and transfers). The difference in these two figures is the variance. RTIconnect identifies the variance for each inventory item, in units, dollars, and as a percentage.
“Our daily variance management process, when it is done properly, adds, in my opinion, two to two-and-a-half percent of profitability to our company,” said Mr. Hodge. “That percent is based on a percent of sales. It drops straight to the bottom line.”
Hart’s restaurant managers perform a daily inventory of 30 items, which account for about 98 percent of their food cost. Managers are taught to investigate and reduce both the waste and the variance after waste on those items. They must recount every item that shows a variance after waste.
If the inventory was not miscounted, then they realize that product is actually missing. “It’s not just a math number. You're missing 16 Whopper patties. They now believe— they now realize—‘I'm missing 16 patties that were probably given away and people are collecting money for it, and I'm not taking that to the bank.’” The manager posts that variance on the wall in the restaurant. “They're letting people know, ‘hey, this product disappeared yesterday and I'm looking for it.’ One of the things that does is raise awareness in the store to the employees that we're not turning a blind eye to theft.” Managing the variance on a daily basis, he said, helps us “manage our gross profit and our food cost.”
Inventory: Organize, Count, Order
As part of his “playbook” in getting restaurants started with RTIconnect, Mr. Harris went to each restaurant and first had them improve the organization of their inventory so they could more easily make daily counts. Then they organized the RTIconnect inventory count form in the same order as in the restaurant: by freezer, cooler, and dry storage.
In one of the restaurants, he said, the “freezer was so packed, we could barely move the product around that we were trying to organize.” This was the result of over-ordering, which he said RTIconnect has eliminated. “One of the illustrations that I love to use when I'm in a restaurant,” he said, describing why over-ordering is unwanted, “is it's better for the money to be sitting in the bank than sitting on the shelves waiting to be thrown away or stolen.”
The first order RTIconnect calculated for that restaurant with the packed freezer was so small it didn’t meet their vendor’s minimum case order. For the purpose of training the restaurant and district managers, they placed the order as calculated by RTIconnect and paid a $35 sub-minimum order charge.
“What happened was the amount of inventory that was in the store got reduced because we were not over-ordering product anymore, which in turn made it easier for the restaurant manager to count inventory daily because she didn't have to count so many extra cases —and it also makes it a little more difficult for people to get away with theft. If you have two cases of pies for example, sitting in the freezer, an employee might think well if there's 72 [slices] in a case and there's two full cases back here, are they really going to miss one pie? But if they go in there and they're thinking about stealing a pie and there’s only 12 left, they know that we're going to be missing that pie if they take it. And it forces some more integrity. Also, it forces the managers to be more careful about their waste, because they can no longer afford to waste half a case of Whoppers in a day or two days, because they need to make sure that their inventory is going to get them through their next truck.”
Another step in his getting-started playbook is to print out the calculated order and have the manager walk around the store and compare the order to what she would have ordered on her own. In one instance, the calculated order included a case of Splenda™—which wasn’t out in the open in dry storage where the manager would see it, but was in a cabinet under the drinks station. When she checked the cabinet, there were only 30 packets left in the box. “She was downright giddy, because she would not have ordered this product. She would have probably run out, and it would not have been a humongous deal but nonetheless RTI reminded her to order. It's a small success story, but it's significant because it showed her just how accurate the system was.”
Added Mr. Hodge, “This is an illustration of how we had negligence in gross profit control, in ordering, in waste, and with Dustin pointing the direction to this manager, in under 10 days we brought cost down in that restaurant 1.2 percent. That is one of our higher-volume restaurants, and that amount was in excess of $1,700 worth of groceries… Without RTIconnect, that $1,700 would never have gotten to the bottom line.”
Controlling Cash and Labor
In addition to the Food module, the standard RTIconnect implementation also includes Labor and Cash modules. Hart uses all three. The amount of time managers spend creating labor schedules has decreased, and the Cash module has allowed Hart to streamline processes in the office, Mr. Harris said. Prior to using RTIconnect, their office spent hours per restaurant every month hand-keying sales, payroll hours, and end-of-month inventory into its general ledger and payroll system. Now what took several hours takes only 15 minutes, he said, greatly increasing productivity.
The Cash module, Mr. Hodge said, has added another layer of security to their already tightly controlled cash procedures. “We weren't rookies when it came to cash handling. Over a period of 20 years, I’ve figured out what the weaknesses are in cash handling.” Prior to RTIconnect, his company used a spreadsheet to track tills and safe counts. Now with RTIconnect, in addition to tracking tills and safe counts, they can also verify and validate their deposits.
A manager can “go in at any point and see what deposits haven't been verified or validated and that's a red flag to them right away,” explained Mr. Harris. “The same is true if they're showing cash over/short for the day—they’re going back to their tills and adding up the cash over/short for each till and lining the tills up with their deposits to see where the money disappeared from. It makes it easier for them to isolate where money might have walked out. When someone is a certain amount over or short, they get written up, they can be terminated.”
Another feature they use to improve profits is RTIconnect’s auditing controls which, coupled with security cameras, enables them to identify theft. “Fairly recently,” said Mr. Harris, “somebody was going into the computer at the end of the day on tills, changing the amount of credit cards that were reported in the tills and on the end-of-day cash sheet, so they could take that amount of cash.” Because RTIconnect logs changes that are made, management can match the date/time stamp on the RTI report with the security camera and see who made the change.
Too Good to be True? Getting the “Buy-In”
Both men acknowledged that the biggest obstacle in succeeding with RTIconnect was simply getting managers, supervisors, and district managers to believe the numbers. Some, said Mr. Hodge, believed the computers were “messed up,” that a computer could not do a better job at calculations or of running a restaurant than they could. “Imagine somebody being in the restaurant business for 20 years and they get these ‘feelings’ of what is correct on a gross profit product mix… RTIconnect is so dynamic and so mathematically detailed as far as calculations are concerned, that they do not understand it right away.”
In one case, Mr. Harris said, a restaurant had a history of problems with their POS “and because of those issues there was as a lack of faith in the system. People did not believe that the numbers in RTIconnect were what the numbers really were. Going in and forcing them to manage the information that’s on that [RTIconnect] report was really the buy-in for one manager. When she started seeing results even on the very first day after we set up the process, the emotional reaction that was on her face was—I'm not even sure how to describe it… It surprised me how much it surprised her.”
He confessed that his own buy-in of RTIconnect was not immediate. “There were days Gary was dragging me kicking and screaming, and I was telling him this was not going to work for us, this was not going to do what you think it was going to do. And I was proven wrong. And I will gladly admit that I was proven wrong because guess what, it has made our company that much more money.”
“Literally at about the seventh or eighth month we started getting wind up in our sails and the ninth or tenth month it got better, and amazing results started happening,” said Mr. Hodge. “I call the effort the Star Wars effort, based on where I came from with Lotus 1-2-3, that we’re actually on a model that allows us to be in FIFO (first in, first out). As we deplete old inventory at an old price, RTIconnect goes in and captures that new inventory at the new price and not only captures it at the current price but also gives us blended cost for the month, which allows us to track much closer than anything I could ever imagine.
“No matter what the circumstances have been… we know that RTIconnect is giving us actionable data that will make us more money.”
About Restaurant Technology, Inc. (RTI)
RTI (www.internetRTI.com) is a leading developer of technology solutions for the restaurant industry, and a Microsoft Gold Certified Partner. Today more than 9,500 restaurants, including many of today’s best known brands, rely on a broad suite of RTI hospitality solutions. Application of RTI solutions enables restaurant operators to maximize efficiencies in their restaurant operations, reduce operating costs, and improve service to guests, which ultimately yields more profitable restaurants. Incorporated in 1985, the company is headquartered in Atlanta, Ga.
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Contacts:
Greg Waddell
Vice President – Sales & Marketing
Restaurant Technology, Inc. (RTI)
ph: 770-590-4300
fax: 770-590-4313
Gary Hodge
Managing Director
Hart Restaurant Management
361-882-4100
Dustin Harris
IT Manager
Hart Restaurant Management