How To Run A Restaurant Sitemap

Preface - Food sales in the restaurant industry reached over 17 billion dollars in 1958. This represents a sales increase of more than 40 per cent since 1950. Despite this growing trend for eating out and a steadily expand­ing sales volume, the mortality rate in the food service industry is ex­tremely high. One investigation after another has shown that from one-fourth to one-third of the restaurants that begin their existence in any one year were out of business by the end of that year.

01. Restaurant Business - Selling prepared food to the public for a profit is an occupation almost as old as civilization, an occupation chosen by millions of people throughout the centuries. Ancient Egypt had inns of a kind. One on record offered a menu in keeping with the modern limited menu—one dish consisting of cereal, wild fowl and onions. Ladies were not allowed. This was 512 B.C. Today ladies are more than welcome.

02. Location - Wouldn’t it be wonderful if the selection of a site for a restaurant could be determined with a geiger counter or a dip stick? We could walk along proposed sites and nonchalantly wait for the buzzing of the counter or the sharp down pull of the dip stick to tell us that this is it! Unfortunately, no one has invented the proper device to pinpoint, successfully, the proper location. Our concern with location is realistic because so much of a restaurant's success may depend on its location. Furthermore, as time passes a location that was regarded as an ideal location can slowly turn sour.

03. Buy or Build? - The fundamental consideration facing all prospective restaurant owners is whether to build or buy a food service operation. Most of the time analysis of the location and the characteristics of the sites or physical facilities available are the determining factors in this deci­sion. At other times, because a variety of opportunities may exist in a single community, the future restaurant owner is faced with a num­ber of alternatives. In this case only a detailed examination of certain basic factors involved will enable the newcomer to make a profitable and satisfying decision.

04. Organization - There are three basic forms of organization through which a food service operation may be initially organized and operated. Most of the 195,200 restaurants in the United States are organized as individ­ual proprietorships. This number is followed closely by the partnership form of organization. The corporate form of organization is at present a very small percentage of the number of food service operations.

05. Credit - The ability of an individual or firm to obtain credit depends on the prospective creditor's belief that the individual or firm will be able and willing to repay at some specified date in the future. The basis for credit then will depend on the debtor's ability to pay—the nature and value of his capital or present investment, his present and future in­come, the size and type of other claims and obligations; and on the debtor's willingness to pay—his character and reputation for honesty, business ability, and for prompt payment of past obligations.

06. Obtain Capital - Since the present or prospective owner of a food service operation can obtain capital from only investment or loan sources, one proper classification of capital is based on source; that is, does the additional capital represent an investment or a loan? Also, because capital is needed for either short or long term objectives, another classification is the length of time that capital will be utilized.

07. Food Equipment - Each year over 25,000 owners of food service establishments fail in the difficult task of providing maximum satisfaction to their patrons at a profit for themselves. Some feel the responsibility for their busi­ness failure lies in bad luck, high labor or food costs and the public. Others find fault with general economic conditions, poor location, and inability to get trained help. As they close their doors for the last time, they blame everything and everyone but themselves.

08. Layout - The value of careful planning and layout of food service operations has been demonstrated many times in the past. A well-planned layout invariably conserves high priced floor space, controls and promotes increased production through a compact, logical arrangement of the right equipment in the right place, increases employee efficiency and employee morale, and lowers payroll costs by successful application of design and layout principles.

09. Insurance - Depending on location, size, and nature of the restaurant, the list of perils from which a food service operation needs protection falls into three general classifications: (1) protection from perils which might result in a large loss and must be covered by insurance; (2) pro­tection from perils to which the restaurant is constantly exposed and which may or may not result in serious loss; and (3) protection from small losses which can occur frequently.

10. Promotion - Broadly speaking anything that is done to increase sales is promo­tion. This includes public relations practices, paid T.V., radio and newspaper advertising, highway and entrance signs, direct mail to customers, and publicity of all kinds. The printed menu is part of promotion, literature to induce the customer to buy.

11. Personnel - The first restaurants as distinct from taverns or inns were small and the personnel organization simple. The chef wore a long nightcap type hat and it helped to identify him as the man in charge. He also carried a large wooden spoon which the new scullion (kitchen worker) soon learned was a symbol of authority as well as a useful kitchen tool. Hapless scullions and maids were thwacked with it to keep them alert while turning the spit by the open fireplace or in pounding up some of the ingredients for a meal.

12. Labor Cost - Labor cost in the restaurant field has risen to the point where increased sales can no longer offset the increased cost of labor. Over a period of ten years this cost has increased from an average of 25 per­cent to nearly 30 percent of sales. Payroll control is the most discussed subject in the restaurant industry today. The concern is not only for the immediate problem of controlling payroll now, but also the readily visible danger of further sharp increases because of the increasing growth of unionism, increased competition for labor by members of the hospitality field and by competitive industries in the labor market.

13. Training - Training is a word like "education," easy to say but not too clear at times as to what is meant. Education, it is said, can cure most of the world's woes. Certainly training is a keystone of good food service. But what kind of training? Who is to do it? How?

14. Manage Individuals - The title of this chapter is purposefully worded to emphasize the fact that the employees of any organization are individuals. The title also suggests that effective personnel management is based on tech­niques and methods used to control individuals within a group rather than the group as a whole.

15. Menu Planning - An error in planning any of the following processes will cause food costs to rise: purchasing, receiving, storing, preparing, processing, serv­ing or selling. A repeated consistent error in any one of these phases can conceivably put an operator out of business!

Consequently, a competent food service operator must know how (1) to plan a profitable menu, (2) to purchase quality food at eco­nomical prices, (3) to receive and store his food items properly, (4) to control the food issues from the storeroom, (5) to prepare and process foods according to a determined cost and quality, (6) to serve foods attractively and (7) to account for sales of food.

16. Storing Food - After food has been ordered, management is concerned with seeing to it that what was ordered is received and stored so as to retain its quality until prepared or served. In a small restaurant, the manager himself receives the food, checks it to see if it meets the specifications, weighs, and/or counts it. Large restaurants can employ a part-time or full-time stewards or storeroom clerk to receive, store, and issue the food. But it must be the responsibility of one person and no one else.

17. Standards - Not so long ago a management consulting firm was called in to examine a large restaurant company and to make recommendations. One of the recommendations presented to the company was that a separate department should be established with the department head to be called the Director of Standards. The owners and management of the business were puzzled. What would a Director of Standards do? What kind of standards were to be included in the man's job? They were only reflecting the restaurant business as a whole. "Standards" as such were a new idea to them and to most restaurant operators.

18. Food Costs - Food accounting systems represent methods of accounting for food costs and not control of food costs. Accounting systems aid in scien­tifically fixing prices and in pointing out areas of high costs. These functions ought not to be confused with detailed procedures to control costs.

19. Profit + Loss - The profit and loss statement is a financial summary of the money or claims for money received by a business unit and the cost in terms of money to produce the goods and services that a business unit sells during the accounting period. The basic purpose of the statement is to present management with an analysis of the business changes that have taken place from one balance sheet to another.

20. Work for You - The preceding chapter described how the incorporation of three basic rules transformed a simple one-page financial statement into a dynamic management tool. Mention was made of the importance of the organized data not only in determining managerial efficiency and departmental productivity, discovering reasons for sales and cost fluc­tuations, and establishing forceful sales promotion campaigns but also planning expense programs. This section elaborates on the theme of planned expense and points out the enormous value a properly designed comparative operating statement can have for any food service operator.

21. Accounting - Long before the birth of Christ, the Phoenician, Roman and Greek businessmen were devoting a definite period of each day to the time-consuming task of recording every transaction that affected their busi­ness on the pages of a simple record now called a journal. Sometime during the Middle Ages or before, the Italians discovered a more work­able system of accounting called "double entry" bookkeeping. In 1494 Luca Paciolo, an Italian monk, wrote the first publication of its kind describing the features and practices of accounting in "the Italian manner."

22. Tax Controls - This chapter is especially designed to aid the owner of a single unit food service operation doing less than $200,000 gross sales annually to install a simplified set of records for tax and control purposes

Regarding the need for tax records, the rules and regulations of the Internal Revenue Service state that all business organizations must keep adequate records to reflect clearly taxable income.

23. Future - One thing we can be certain of regarding the restaurant business is that there will be a great many changes in the years to come. The exact changes no one can predict but it is relatively simple to identify trends and to assume that the trends will continue. What are some of the more discernible trends?

Appendix -

"Dishwashing Dividends"
Complete sequence for producing clean tableware by dishwashing methods. Also operation of dishwasher with automatic detergent dispenser.
Economics Lab., Inc.
Guardian Bldg., St. Paul 1, Minnesota

"Flying Saucers"
Fine pictorial presentation of best machine dishwashing methods.
Economics Laboratory, Inc.
250 Park Ave., New York 17, N.Y.

"Spotlight Breakage"
Modern breakage control methods.
Economics Laboratory, Inc.
250 Park Ave., New York 17, N.Y.

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