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POINT SALE SYSTEMS-REVIEW

Point Sale Systems Restaurants-also referred to as POS or Point Of Sale.

I will put into perspective some key elements of this topic based on my own personal experience of forty years as a restaurant owner and executive chef all over the world. Look before you leap meaning that I am here to prevent you from getting the wool pulled over your eyes!

You must know where you want to get to and define your business goals, which I assume, first and foremost must be to make money and certainly not loose it.

Where do I want to go?

― Lewis Carroll, Alice in Wonderland

Hit miss definition-

The definition of hit or miss is a term used to describe something that might be good sometimes and bad others, especially when you cannot predict when it will be good or bad.

I have had the privilege of conducting several workshops for industry professionals on behalf of Micros, now known as Oracle and of the world’s leading point of sale systems.

I never cease to be amazed at how many restaurant and operators work on a hit-and-miss basis.

The food and beverage industry, particularly as related to restaurants, is a science and requires that certain fundamental principles be observed.

The foremost of these is that one is in business to make money!

The myth of cost of sales % referred to COS

The cost of sales represents the direct costs related to the purchasing of a product that is sold to a customer.

So your COS would be the total cost of all the ingredients in a recipe,

Most commonly, we are led to believe that our COS must be between say 30 or 40 percent come no matter what!

Chefs are often fired for “missing the target”

Achieving a non varying COS

The only example in which this may hold true would be in the case of a vendor that exclusively sells only one product at a constant COS like say BBQ chicken that costs $2.40 ingredients and he sells for $8, hence a constant 30% COS.

However such a vendor does not exist as there will always be refreshments, side salad, fries and so forth on offer, to compliment the chicken.

In other words his COS % would vary depending on the Sales Mix, that is the combined sale of all items.
Divide the total sales amount by the total cost amount and the calculation gives you the COS %.

Unless of course this vendor was marking up every item at a constant COS. But this would not make sense as, for example, a can of Coke that he buys for $0.10 would have to be sold for $3 in order to achieve the 30% COS, yet most of his competition sells the same item for $2.2

Where would you be better off?

– selling more lobster dishes that cost you $12 for $29 menu price

COS 41.37% (this you don’t put in the bank)

Profit $17 (referred to as the contribution and you put it in the bank)

OR

-the chicken dish costing $2.4 and selling for $8

COS 30%

Contribution $5.60

So If at the end of a day you sell 100 chickens and 30 lobsters;

Total cost: $600

Total sales:$1.430

Contribution: $830 ($320 from the chicken/$510 from the lobster)

Combined COS: 41.958 % (OMG chef missed the30% target!)

Yes you do need a target COS%

In order to run any successful you must have a business plan, concept of the food, type of clientele, competition, location and a series of other factors. When you have designed your first menu, and obviously not in a foolish way by calculating your menu prices on a thumb sucked constant percentage. In my lobster example you would have to sell the dish for $40 as opposed to the $29 in order to achieve what you have decided to be a global COS target of say 30% COS. Meanwhile, Jo Blogs down the road sells lobster for $25.

Your pricing plan must take into account the competition. You can veer off competitive pricing to a minimal extent like why I charge $29 while Jo charges $25. I have been to Jo’s and I know I can do better!

Be realistic, not over confident at the outset. Don’t think of Jo as a busker and yourself as Mozart. meaning don’t count your chickens before they hatch. The proof of the pudding is in the eating.

So now you have your menu. Until you start getting traffic through the door you have no idea of which items will be popular and which not. Only after you have traded for some time will you have developed history based on Sales Mix. If you are wise you will weed out the non sellers.
Never start off with expensive printed menu formats that cannot be changed at a moments notice

There is a technique known as Cost Margin Analysis for aiding in determining effectiveness of your sales mix.
I will get back to this later.

Point sale cash register:

A so called “cash register” is for a mamma and papa store where she does the cooking and he looks after the customers.
They will not be reading this article anyway.

 

Jo Blogs plans his new restaurant:

His project is now quite advanced and he needs a POS system.

He does some research on line. Cost is also an important factor.

He identifies several companies and makes appointments with sales reps.

He finally decides on a brand. The rep has successfully convinced him that this is all that he needs, lots of bells and whistles, waiter friendly and so forth. Jo buys and installs.

The POS works just fine but after two or three months of trading, Jo is an unhappy man.
His restaurant is almost always full and clients leave rave reviews. He has a good chef and a contented team.

But, bottom line results are horrific and way off the 30% COS target that he had planned and was told to aim for.
He has missed essential factors in stock control such as COS and Sales Mix Analysis.

Jo’s new POS system has done wonders front of house (FOH) but absolutely nothing to curb the losses occurring back of house (BOH)
His chef is conscientious, checks in food deliveries diligently and does not waste.

However, there are no standard recipes set by the company nor photos of the plates as they should be.

Alphonse the chef cooks delicious, well presented food at all times. The fact that many dishes never look or taste quite the same on a consistent basis, has not bothered the guests in the least. They love his cooking.

Essentials of BOH control:

1) Integrated communication from front house POS to back office hardware and software.

The back office server essentially controls all activity including programming of the Front House POS, adding menu items, changing prices and so forth. The POS that Joe bought has to have all these functions performed manually on the FOH terminal screen. But this is the least of the worries, those you can live with.

But no back of house package. Now that is a problem!

2) The main and most important requisites for a BOH system.

a) -recipe archive

b) -purchasing module

c) -reports

The recipe archive:

This must be created by actually making the dishes physically in the kitchen. Note the ingredients and method.

Only when you are satisfied with the result do you enter the details into the recipe data base. At the same time take a photo of the completed dish. Some programs allow one to post a photo on the recipe itself so when printed out for the kitchen, it contains all the info.

The recipe archive will have categories as in starters, mains, desserts, bar cocktails as well as intermediate recipes. These are bulk preparations such as Bolognaise sauce that you make in-house. These are sub items for use in recipes that call for them. For example in a spaghetti recipe; Ingredient line-sub recipe-bolognaise. Of course if you buy that sauce in, then it is a normal inventory item.

The big advantage with posted (entered into the computer when manufactured) intermediates, is that these items become part of inventory. So when you do your periodic stock count your printed stock sheet has a separate intermediates category. As chefs, you will be familiar with taking stock and having to “guesstimate” the quantities of items that your half bucket of sauce contains and enter these guesses on your stock sheet as x amount of canned tomatoes, onions and so forth. All by eye and memory of recipe. Accuracy is totally impossible.

When you post manufacture of intermediate items such as bolognaise that uses say 10 cans of tomatoes, such are deducted from inventory and their value add to the intermediate item. So the tomatoes don’t just go missing in reports (later discussed)

Note: recipes must be entered in a consistent way-kilo, gram, liter etc. Not box, bunch, pinch of, and so forth. Same with the purchasing module next discussed

The purchasing module:

This works hand in glove with the recipe model as well as inventory

Every invoice is posted on BOH

You set up all your suppliers separately on the system.

When a delivery comes in you process it BOH with relevant info; invoice number, date etc and the individual products.

As soon as you do this the items are added to inventory and simultaneously updated on recipes. So a recipe containing tomatoes will change in value if the price goes up from a previous purchase.

Note: Here as with recipes, consistency is vital.

Remember if your recipe calls for 100 gm fresh tomatoes and you have purchased in the value of a “box”, you are lost. The recipe will not understand the unit “box”

You may however have a “portion” value so you can buy in portions if the item in your recipe is also “portion”

With items like veg and fruit you have to be “the boss” with the suppliers. They may normally invoice, bunch, case, apples each. I just insist that they invoice everything in Kilos or they don’t get my business

Recipe and Purchase items must have the same values!

You always enter the net weight of the item.

Now comes the issue of usable content:

Say you are invoiced for 8 kilos of whole sirloin that you intend to trim and portion yourself.

You need to have done yield tests on all relevant items especially high value items, meat and fish.

So your yield result for example on 8 kilo whole sirloin is 6.4 kilo usable after trimming. Divide 6.4/8 and you get 80%

80% is your yield. 20% is therefore your Weight Loss factor

So have a table of important weight loss factors next to your computer.

Before you buy in the sirloin refer to your weight loss table. You see it is 20%.

So on your calculator you go 0.2X8=6.4 and this is what you enter as a purchase.

If you did not do this correctly your recipes would be effected in the following way:

Purchase 8 instead of 6.4 kilo sirloin at $32/Kilo =$256

But it is not actually $32/kilo it is $40/kilo

It is $256/6.4 not 8

Your recipe if purchasing wrong: 250 gm sirloin at $32/kilo=$8 recipe cost

When it is actually $10 recipe cost

This sort of error will affect not only your final COS report but also the mega important variance report, next discussed

The reports module:

Now you have done all this PT.

Alphonse is cooking strictly to the standard recipes

You are entering purchases correctly. Every purchase is adding to inventory and updating recipes

The POS is deducting from inventory ingredients with every sale.

Now comes time for the big monthly, weekly, whatever, stock take.
I recommend weekly as small weekly fires are easier to handle than big monthly infernos!

You print out your stock sheets and start counting weighing and so forth.

You enter the stock figures on the BOH computer.

You print the usage report:

This reports item by item what you started the period with, referred to as opening stock + purchases-closing stock=usage.
Does not bother about stock reduction through POS sales.
It only says “this is what you have actually used”

Now the result of all your hard labors; The variance report!

Why actual yield less than theoretical yield-or visa versa?

This report takes inventory, deducts every POS sale via recipe (in other words what you should have used per item)

So cream, for example via recipe should have been 56.7 liters usage referred to as theoretical usage.
But actual usage is 74.2 liters. Your variance is 17.5 liters

The next step in the cycle of control is to analyze the variance report and take “corrective action”.

I have actually worked in some companies where the decision makers review the variance report and say things like “wow, have we used so much cream?” or “what’s happening to the lobsters?”
Then just go on to live another day. No corrective action. Because this takes dreaded work!

Corrective action is taken in the following way:

Your BOH system must contain a report “find recipe with item”
So if you enter the ingredient “cream”, then all recipes that contain “cream” will be displayed.

Once you have this information it must be investigated at grass roots level, that is in the kitchen
You must task your chef to get to the bottom of these issues by providing the information.

There will often by thousands of variances. Highlight the high value ones. Like patients in a hospital. You want to cure the cancers as a priority and not the little sniffles.

As to my former comments on the weight loss table. You don’t really want to include onions, carrots and so forth on your table. Items that may have a loss factor of a few percent after peeling. After all you don’t want to be a fanatical slave to the computer. There will inherently be small variances all over the page.

Causes of variances are numerous.

-in the main variances derive from not following recipes as well as over or under portioning

-not checking weights of delivered goods

-theft

-wastage. Spoilage resulting from poor storage practices

-staff “munching” while working

-not having recipe controlled staff meals rung up on POS, either at zero value or discounted.

I prefer to offer discounts to staff for restaurant menu items. That way I don’t have to bother with separate staff meal controls as this adds to the kitchens work load.
We are making those dishes for the customers anyway, so its just another kitchen check, recipe controlled.

This is by no means the end of the toil and strife. The operator must understand and practice Cost Margin Analysis, Menu Engineering and a host of other principles and tactics in order to be successful in a highly competitive field of endeavor.
The primary goal of menu engineering is to encourage purchase of targeted items, presumably the most profitable items, and to discourage purchase of the least profitable items.

Cost Margin Analysis. 

Ranks menu items as follows;

Stars-Items with higher than average contribution (profit) and lower than average cost. Always promote

Plow Horses-Items with higher than average contribution but higher than average cost. Always promote

Puzzles-Items with lower than average contribution due to low popularity but also enjoy lower than average cost-
Think of replacing. These items tend just to gather dust with no benefit

Dogs-Items with lower than average contribution, low or even high popularity influenced by higher than average cost of sales.
Abandon these or re-invent them to cost less

 

Profit is sanity, revenue vanity?

Nevertheless, I should have made perfectly clear that it is not the COS % that really counts but rather the variance from the planned goal.

If your business plan and target market dictate that your theoretical COS target is 60% and you come in with an actual of 62% and a variance of 2% you may well be laughing all the way to the bank and on your way to a healthy net profit

So in many cases a high COS very often does represent more money in the bank. It’s all about contribution. Turnover is vanity, profit is sanity; or is it the other way around?

Who said work smarter not harder!

Which POS?

I have worked extensively with Micros, now known as Oracle and of the world’s leading point of sale systems. I have also worked with Aloha, more basic than Micros but does the job as well as, way cheaper that the Rolls Royce Micros.

Your choice of a POS system should, regardless of brand, incorporate features outlined in this article. Be sure that there is adequate support in your area. Often they sell then run!

I would be happy to respond to any mails if in any way I can help or offer advice. No other agenda!

patrick@mykitchenhealth.com

 

 

 

 

 

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