Gaining Perspective

Especially for small business owners, being deeply involved in the day to day activities can make it tough to also keep an eye on the big picture. Great football coaches face a similar challenge during the fast and furious action of each football game. That is why after the game they spend countless hours carefully reviewing game films in order to spot mistakes and opportunities for their team to improve over time.

Recently, I was chatting with Independent restaurateur Jordi Camps about how he has been handling the fast and furious changes to the business landscape over the past year.

Jordi owns Picasso’s Gourmet Deli here in Modesto. During our conversation, he said he had recently stepped back to reevaluate his entire business, the way football coaches evaluate game films. Since Jordi is in the same boat as many other Independent restaurateurs, I thought that his experience was worth sharing.

Picasso’s Gourmet Deli is located in a highly competitive business district. Like many Independents, Jordi faces at least a dozen cheaper food alternatives within a two block radius, including a McDonald’s around the corner and a Subway directly across the street.

Because Jordi’s restaurant lacks chain buying power, he cannot successfully compete on price. So instead, he has always focused on serving consistently great tasting sandwiches, made with premium meats and cheeses, served on artisan breads, baked and delivered fresh daily. As a result, he has attracted a loyal following of quality-oriented patrons who do not mind paying a bit more for their favorite sandwich.

In recent years, Jordi’s profits have been squeezed by wildly fluctuating costs (on everything from rent, to wages, to utilities, to ingredients) and, more recently, declining customer counts due to the soft economy.

While some of Jordi’s ingredient costs have recently relaxed a bit, there was a time last fall when things felt especially out of control. That is when he decided that he needed to get a better handle on understanding his current profitability.

Jordi says that the hardest part was knowing where to begin. That is when he came across an article in a past issue of La Trattoria explaining “menu profitability analysis.” (Editor Steve Rouse has reprinted that original article on page three of this issue.)

In a nutshell, the technique helped Jordi compare the popularity and profitability of each of his menu offerings to learn which items were paying the bills and which ones were underperforming profit-wise.

Despite spiraling meat and cheese costs at the time, the exercise reassured Jordi that most of his gourmet sandwiches and soups were still relatively profitable. On the other hand, he also learned which menu items were relatively underpriced, given the cost of ingredients required to make them.

The bottom line is that by better understanding his existing menu profitability, Jordi could then make smarter choices about how to improve it. For example, it helped him streamline the number of ingredients he must keep on hand, by eliminating a few slow moving menu items which required unique ingredients.

Additionally, by carefully observing his employees in action (like a coach watching a game film), Jordi discovered that they had fallen into the habit of portioning entrée salads by eye, rather than by weight. As a result, relatively pricey ingredients, like grilled chicken, were being adding inconsistently. Correcting that situation not only improved his plate-to-plate consistency, it also helped eliminate a previously hidden cost.

Jordi’s final modification to his business was to redesign his menu in order to highlight a few of his most profitable sandwiches and to moderately increase the price of several others. More importantly, sales of those particular items remained steady after the increase. Even better, now that ingredient costs have relaxed a bit, his bottom line is much healthier.

No one knows how long tough times may last. But as Jordi’s experience shows, arming yourself with good information about your business’ performance will help get you through difficult times, while positioning your business to excel when times improve!