Foodservice by Design

Team members from PROFITALITY discuss how industrial engineering can be applied to the foodservice industry.

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Protecting Profitability

Good news: Commercial and noncommercial foodservice operators have plenty of options at their disposal that can help their businesses weather this pandemic-induced storm.

juan martinez hsJuan Martinez, PhD, PE, FCSI, Principal PROFITALITYThe first solution may seem the most obvious: Drive sales by meeting the customers where they are. In other words, continue to focus on and become experts in off-premises and digital sales. After all, the best way to grow the bottom line and drive better unit economics is through enhancing the top line. For foodservice operations that have the appropriate controls in place, any additional revenue flows to the bottom line at a much higher rate. This is because baseline sales already cover the operation’s fixed costs. That means the only additional costs associated with new revenue are food and labor. Operators may be able to better leverage their existing labor, which could result in the business spending a lot less on personnel for the additional sales than it typically would.

Another solution is embracing technology and equipment options that will support higher throughput and lower costs. Smaller, more compact, more versatile equipment that fulfills multiple duties and takes up less space can help solve a variety of challenges.

Yet another option: Keep the facility as compact as possible. Apply analytics to define the relationship between sales and the resources the restaurant needs to support these revenues. Success is all about deploying the right resources in the right place at the right time. It was that way before the pandemic, and it will remain that way, no matter the business conditions. Minimizing the facility size will also reduce construction and occupancy costs, driving improvements in the profitability of the concept.

The fourth solution calls for using or selling excess capacity. Consider applying the excess capacity to another concept that can coexist in the same space. This could mean developing a virtual brand, as many chains have, or even serving as a ghost kitchen for another restaurant concept. These steps connect to the previous point about leveraging the digital growth that occured during the pandemic. Digital and off-premises are here to stay, so figure out how to leverage this sales-building mode for your concept.

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Reengineering Initiatives

Simplify operating parameters by undertaking a reengineering effort in all areas of your operation. These efforts should focus on reducing costs — in this case that’s labor and food — facilitating better customer service and removing bottlenecks that inhibit more transactions and sales in the peak business hours. Keep in mind that digital sales require less labor to produce than nondigital ones. That’s because the customer handles placing the order and making the payment. Technology used by the operator accepts both, thus reducing the demand on labor. For some concepts, this could lead to reducing more than 25% of the work content that goes into completing a transaction.

The reengineering initiative must include the menu side for these efforts to be truly successful, though. Replace costly components with more margin-friendly ones. You still need to provide consumers with the innovations they seek, but operators will find them if they go through concerted efforts to look for options.

Use labor optimally and provide the operation with the right labor in the right place at the right time doing the right things. Understand what labor does down to the microsecond. Managing labor as a percent of sales is not the best way to handle this precious resource, particularly when costs show no signs of slowing down. Instead, apply a work content and activity-based system that defines labor based on the true time it takes to complete any task. Once you know how much labor you should have, then schedule it optimally, using the sales patterns, including the transitions between peak and nonpeak periods, especially the prep schedule. If the concept does a lot of prep, it is important to have a system to define how much to prep each day and how long it should take.

One additional byproduct of undertaking an activity-based labor initiative is that it will provide the truth about how much labor is necessary to run a foodservice operation. If you need more labor than the business would be able to support to drive the desired profitability, with the very detailed micromotion information that you have on the labor, you can define the reengineering that could and should take place to bring the numbers into alignment.


Juan Martinez, PhD, PE, FCSI, Principal PROFITALITY, Miami, This email address is being protected from spambots. You need JavaScript enabled to view it.