Outsourcing Serves Reduced Labor and Food Costs with Increased Restaurant Management | Article

fast food - restaurant outsourcingAutumn in the mountainous region of northern Georgia features fall festivals and brings to the area many “leafers”–tourists who enjoy nature’s beauty as the leaves begin to turn colors. For Bob Cross, who co-owns three Arby’s restaurants in Jasper, Ellijay, and Blue Ridge, Georgia, September and October mean a spike in sales. “When the leafers and festivals come in, our food sales could spike to double the amount of an average day, and we need to be prepared for that from both a labor and food perspective,” says Cross.

His restaurants use RTIconnect, a restaurant management solution available in a hosted ASP model from Restaurant Technology, Inc., not only to ensure that there are enough staff and food in each restaurant to handle the increased business but also to ensure against overstaffing and wasted food from over-projecting sales.

The system calculates labor requirements based on sales projections and parameters that define when jobs should be performed and how many employees are needed. It uses prior weeks as a trend for projections but also allows manual edit for special events (such as a local soccer game or the fall festivals). “The system keeps the database rolling,” explains Cross. “We can look at last year’s sales during the apple festival on a Friday, for instance, and know how to prepare for this year.”

The RTI system also automates the food ordering process. “Using our product mix sales data from the point-of-sale (POS) system, the RTI program calculates the food we’ll need for the next week and develops an order–with built-in buffers–to our distributors. “It makes it much easier for the store managers to order the proper product and not have too much product or not enough product in the stores,” says Cross.

The Arby’s ROI

When Cross decided to become a franchisee after 17 years of working in various positions at Arby’s Inc., his partner already had a POS system in place in the three restaurants, but it could not accommodate software necessary to help them better manage the restaurants. “It was an antiquated system and so messed up that it would have taken me more than a year to get it straightened out,” Cross recalls.

He opted instead for RTIconnect, a Web-enabled back-office hosted solution. He was familiar with the system because Arby’s Inc. uses the RTIconnect program (in a licensed version) in 1,100 of its restaurants. He wanted to benchmark his restaurants’ data in an apples-to-apples manner with other Arby’s restaurants.

Implementing the system at a fraction of the cost and time he would have spent to modernize the old system was also attractive. “I get my return on the monthly investment (less than $100) within the first two to three days of the month in savings from keeping labor and food costs in line,” states Cross. In a typical fast-food restaurant, labor and food costs comprise about 60 percent of the total costs.

Cross says he thinks of RTIconnect as an efficient manager that he’s not paying, which oversees the labor and food costs and the food delivery.

The system calculates an ideal food cost versus the actual cost (sometimes not all the product that is cooked gets sold, so it’s waste). “An acceptable food cost for us is within one percent of the difference between ideal and actual cost,” states Cross. “With the RTI system we can determine the products that show a dollar loss as waste for a particular day and then quickly pinpoint it back to whatever the problem is–maybe someone wrote down the inventory wrong or entered something wrong on the purchase journal.”

He adds, “The RTI system helps me know on a daily basis the pennies that come in and out of my restaurants.” Before the system was implemented, he and his partner did inventories only on a monthly basis. With RTI they can do it daily. “There’s no way 40 pounds of roast beef can walk out the door one day without us knowing about it,” says Cross.

More benefits accrued with the cash management module of the system. Cross reports that, within 45 days after putting the system in, they caught a store employee stealing deposits. “That alone paid for the system for almost an entire year in all three restaurants,” says Cross.

His partner, a CPA, loves to crunch numbers, but he saw numbers from the old system only at the end of each month. Cross says P&Ls weren’t out until several weeks after a month ended. “It’s too late at that point; whatever money you’ve lost is already gone and you can’t recoup it,” he says.

The Wendy’s ROI

Kevin Stille, IT Manager for Meritage Hospitality Group, which owns 49 Wendy’s of Michigan restaurants that are using RTIconnect, says their prior restaurant management solution “was about 14 times more expensive than RTI and didn’t include the labor scheduling tool.”

He says the Michigan Wendy’s restaurants were taking “about two hours to write a labor schedule per store, per week, prior to RTIconnect.” Now it takes about 15 minutes per store, per week. Before, the managers also had to fax their labor schedules to the HR department; now the HR team just logs onto RTI through the Web and easily accesses schedules at any time.

The labor scheduling feature allows them to better improve on labor–which ultimately improves bottom-line costs and customer satisfaction, reports Stille.

For example, the president of the Wendy’s companies wanted to add one hour of labor beyond what we would normally schedule for the lunch period at all their stores. Before RTIconnect, someone would have to call each store and ask them to staff one more person during lunch, and each manager would have to do the scheduling by hand. Now they just put the requirement for an extra person into the system, and each store manager sees it when logging in to do the scheduling for the next week.

“The labor scheduling feature gives us the ability to better serve our customers at particular times; and with faster service we can bring in more sales,” says Stille.

The labor scheduling tool has other handy features. It highlights increments of time where too many employees are scheduled. And it reads every employee’s personal availability when creating each day’s schedule, thus saving time by eliminating the need to keep track of notes and rearrange shifts at the last minute.

According to Stille, the company is saving in the range of $100,000 in the first year from the difference in cost of the RTI solution compared to the prior system, the reduced costs from overstaffing or from having to pay overtime, and the managers’ reduced time spent in scheduling labor.

Meritage did a three-month trial in two of its locations before rolling it out to all the stores. They had concerns about needing to train people on the system and integrating with the company’s existing accounting and payroll software. Two months into the test, they were happy, had worked out all the implementation concerns, and then rolled out the solution to the other stores in a 30-day timeframe.

Not Just an IT Solution

Greg Waddell, Vice President Sales and Marketing, Restaurant Technology, Inc., says the solution currently integrates with 35 different POS systems. He says implementation includes RTI getting to know the client’s existing day-to-day procedures so RTI can closely mirror the application to work in that same environment.

“RTI’s background for more than the past 20 years is in working with franchisees with five units to hundreds of units,” says Waddell. “We have expertise in putting in a system that is very tailored and customized at the owner/operator level, even though the back end is identical.”

“As a general rule, restaurant managers are very busy, and they have very little time to deal with administrative tasks, so we don’t implement something that’s a totally new environment for them to work in,” explains Waddell. “Of course, if there’s a more efficient way, we advocate that. But sometimes at the unit level there is resistance to change. We’ve found that, if we don’t succeed with the restaurant manager’s buy-in, nothing else matters. The easiest way to get their acceptance is to minimize their time investment and make it as easy as possible to get through their day.”

Cross agrees. “At my Arby’s restaurants, the biggest problem I had to overcome was getting my managers who weren’t computer literate to accept the system. I had some managers who said, ‘I’ve always done it this way for years and have been successful, so why do I need to use the computer?'” His response begins: “Because it will only take you 15 minutes to do scheduling instead of two hours.”

The software runs like a Windows program, so it’s easy to use. Cross says that when RTI trained his staff, “the trainer gave them time to absorb it because it’s a lot of information.”

Stille at Wendy’s says RTI initially conducted two days of training for the two store managers involved in the test. “After that, it was just getting used to it, and both store managers ran with it.”

Customer service is the hallmark of RTI, says Waddell. His clients agree. Stille cites RTI’s willingness to do some programming (at no extra cost) to integrate with a new payroll system the company will implement early in 2007–only a year after the initial implementation of the solution.

Cross adds, “They answer any questions we have and take care of all support and any concerns. Their customer service is excellent. That’s the bottom line. And I know because I’m in the customer service business.”

Lessons from Outsourcing Journal:

  • Labor and food costs comprise 60 percent of a restaurant’s overall costs. Software solutions can efficiently manage the business to not only ensure that there are enough staff and food in each restaurant to handle the projected business but also to ensure against overstaffing and wasted food from over-projecting sales. For small to mid-size businesses and franchisees, a system in an outsourced hosted ASP model is the most cost-effective solution.
  • When selecting a restaurant management software solution, be sure the service provider has experience in implementing, tailoring, and training for small and mid-size companies and franchisees.
  • Despite an owner’s decision, a restaurant manager’s buy-in and acceptance of the software tools is crucial to achieve return on investment.
  • A software solution for restaurant management is not just about the IT, and a hosted ASP solution is not just about lower costs. Be sure to select a solution from a service provider with a reputation for focusing on the relationship and providing excellence in customer service.


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