Counting Plates (Part One)

Expense or Revenue Generator?

The restaurant industry has its own jargon.  It may also have its own language.  We have the titles we give positions and then we have the nicknames we use.  Every back of the house employee in America has learned to answer to the nickname “ahneeda.”  Not familiar with that name?  Stop and count how many times a server walks up to the expo window during a shift and shouts, “Ahneeda side of ranch dressing.”  Managers have their own nicknames for server.  It is the only slightly condescending “Havyoo.”   They can be heard all evening asking, “Havyoo refilled the drinks on table 32?”  Of course servers have their own name for managers: “wieroutuv.”  How many times have you heard recently, “wieroutuv spoons.”?

Today, I am going to talk about the topic all managers dread: renewals.  Let me begin by saying it is not your fault.  The system by which most restaurants order plates, glasses, tableware, etc is fundamentally flawed.  You have been set up in a system that forces you to fail either the people who work for you or the people you work for.  Even worse, the system does a tremendous disservice to the guest, who we are all supposed to be trying to please.

In the last few years, renewal budgets have been shrinking faster than Dane Cook’s income.  This is particularly true in corporate restaurants.  Pencil pushers trying to maintain dividends for shareholders have seen this as an easy place to pinch pennies.  You are trying to do more with less and hearing the complaints daily.  You go over budget, servers still complain, and the guest wonders why their meal is taking so long.

In order to sell food and beverages to your guests, you need plates, glasses, and silverware.  You cannot predict which type of plate or glass is going to be broken on any given night anymore than you can predict which dusty bottle of single malt is going to be needed for the service.  When the bottle of Glenfiddich that has sat on the shelf behind your bar for three years gets low, your order a new one.  When a plate breaks you get annoyed and try to ride it out until the next period.  The broken plate was responsible for generating more revenue during its time in your restaurant than the bottle of scotch was, but you are more likely to immediately restock the bottle.

The source of the double standard is how most restaurants account for these items.  Food and liquor costs are accounted for as costs of goods sold.  An unopened bottle of scotch technically does not cost you anything because it is considered inventory.  An unopened case of glasses goes straight to the bottom line.  Since the profit generated by a plate cannot be directly accounted for, it is not counted as inventory on hand.  As a result this non-perishable revenue generator is seen purely as an expense.

Food and beverages are not seen as expenses on the P&L until they leave inventory.  Whether it is as a result of being sold, wasted, comped, or thrown away, until it loses the ability to generate income, it is not considered an expense.  A plate is considered an expense as soon as the invoice arrives.  Before it even comes out of the box, it hits your P&L.  There is no way to account for the revenue it generates from the time it is ordered until the time it must be disposed of.

Actually, there is.  Plates, glasses, and silverware should be accounted for as inventory.  This means that the actual cost of these items is accounted for when it is no longer capable of generating revenue.  By doing an inventory of these items your expense is calculated on what you lose, not what you use.  This is a far more accurate way to account for costs.  We all know the formula: beginning inventory+purchases-ending inventory=costs of goods sold.  Divide the result by sales and you have a more realistic idea of what loss actually costs you.

There are several more advantages to accounting for renewals in this way.  Tomorrow, I will outline just a few of them.  I know many of you do not have the power to make this happen at your restaurant.  You do have the opportunity to take credit for discovering this brilliant idea and passing it on to your bosses.  For those of you who do have the authority to change this, I can attest to the fact that it works because I have done it.  This might be the idea that allows you to stop answering to the name “wieroutuv” and focus on running your restaurant.

Tips²: Tips For Improving Your Tips, the new book from the author of The Manager’s Office, teaches the skills of exceptional servers that will increase customer satisfaction and dramatically improve restaurant sales.  This book is more than a server training manual.  It is the secret to teaching your staff to enjoy selling and give your guests the experience that will create raving fans.  To learn more about the book, visit www.tips2book.com.  Use the coupon code “MANAGER” to save 20% at the checkout.

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About David Hayden

David Hayden is a restaurant marketing and training consultant based in Kansas City, MO. He writes a series of 9 blogs collectively known as The Hospitality Formula Network and is the author of "Tips2: Tips For Improving Your Tips" and "Building Your Brand With Facebook"

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  • http://andallofthem.wordpress.com Mishaweha

    Renewals sound suspiciously similar to ‘support’ in the software industry. Maintaining the site (fixing bugs, etc) is very important for maintaining customers, but it’s always the first area in the budget to be cut because it does not directly generate revenue, unlike new features. Pencil pushers – the same across industries. :)

    • David Hayden

      I think in this situation it is more like not giving the people who do the support a new keyboard or monitor when theirs breaks.

      • http://andallofthem.wordpress.com Mishaweha

        I suppose that would be the more direct way to look at it. But I haven’t had any keyboard failures recently. XD

        But yeah. While both are things that are considered extra expenses, renewals sound like a more of a pain since it takes away servers’ ability to do their job. Meanwhile, if we do less support work, we don’t mind too much, but the customer will suffer when their bugs aren’t getting fixed.

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