Ron's Tip Jar/Insights - Published by Ron Santibanez   

January 16, 2013


In This Issue:

Tips and Things - How Often Should You Take Inventory?

Price Point Pricing

Prepared Foods

Quick Tip #11 - The Value of Quality & Training

Restaurant Start Up -  The Process



 Tips and Things

How Often Should You Take Inventory?

 How often should you take inventory? The answer depends on your purpose for taking inventory. Technically, you need to take inventory as frequently as you order. So if you order produce five times a week, you should inventory produce five times a week. When it comes to a fiscal inventory…….that is, counting everything on hand and extending the value of the stock on hand…..you should do that at least once a month for accounting purposes. Some operators take weekly inventory to keep on top of food and beverage costs, especially if they’ve been having a problem.

Some operators take inventory after each meal period to pinpoint product theft, but once a month is enough to calculate the cost of goods consumed for the income statement. When you take inventory before calling in an order to a supplier, you do it to determine the amount required. The amount you need to order depends on how much you will use between successive deliveries.

Still some operators take a fiscal inventory only once a year, which is all that is necessary for income tax purposes. But the operators who take a fiscal inventory only annually have no idea what their food cost is running the other 11 months of the year.

I’ve learned over time that not taking a monthly fiscal inventory is fairly common among many independent operators. Many believe that they have a consistent level of inventory that never changes. There’s a fallacy in that logic, even if the operation has the same amount of sales volume every month and the menu-sales mix remains constant…..neither of which is a realistic expectation. Inventory levels will fluctuate for various reasons.

With a little organization of your inventory records and storage areas, the inventory process can be made an efficient and painless process. One should approach inventory taking with the same intensity and attention given to counting each day’s sales receipts. The process of counting everything on hand should not take more than two hours, depending on the size of the restaurant. The extension of the value of inventory may take another two hours if extended manually or just seconds if you do it with a computer. Just remember: There are no shortcuts for accuracy in inventory: You must count everything in order to give yourself an accurate picture of your restaurants financial health.


Thought For The Day

 "A mistake at least proves somebody stopped talking long enough to do something"


Price-Point Pricing

We have seen that discounting is so pervasive in certain segments....particularly in the pizza sector.....that regular prices rarely are charged. What Taco Bell has done is what is called "price-point pricing." Executive determined the specific price point their customers wanted to spend and then developed special menu items that could be sold at those prices and still return a decent profit.

You can use this method of pricing in order to develop specials that will drive traffic to your restaurant

Prepared Foods

 Prepared, frozen, portioned and ready to use foods can save a substantial number of preparation and cooking hours. Prior to committing yourself to using any of these products inspect a sample to ensure the product will equal or exceed the desired quality level. Examine the additional food cost of the item, could you produce the same product with less overall cost? Remember to consider the additional cost of labor, equipment, utilities, and so forth in your projection. Most often the manufactured product is considerably cheaper as they prepare the item in large quantities using commercial equipment and procedures. Prepared foods will also contribute to your overall consistency as the process product is always consistently produced.

Quick Tip # 11 - The Value of Quality & Training

Restaurant Start Up - The Process 

  The process of opening your own restaurant can be a daunting task. I have always told my clients that the process of opening a restaurant is just that.....a process. In the next few issue of "Ron's Tip Jar" I will explain some of the necessary steps you must take to open a Successful Restaurant and how the plan to open a restaurant comes together.

Decision to Open a Restaurant

The decision to open a restaurant is a relatively simple first step that may have been your dream for years, or the opportunity may have just presented itself and you want to seize the moment. For whatever reason, you want to develop a restaurant.

Your decision to take action initiates several other activities. You review and expand your notes on concepts, markets, menu, design, operating style, and restaurant details in general. At this time, you begin to share your ideas with trusted friends and potential partners. The energy and excitement grows. You plan a meeting to establish a plan of action.  

The Exploratory Meeting

The exploratory meeting focuses on how you are going to pursue the venture. You discuss concepts, operating style, menus, design, and other aspects of the proposed restaurant. Brainstorming is rampant. The enthusiasm and collection of ideas and activities must be organized and controlled. The development process must be managed.


Researching ideas and how other operators perform becomes a top priority. Perhaps you schedule trips to investigate successful or similar restaurants. Unfortunately, the idea of doing research is regarded as a luxury to many. A budget is established for it, and when funds become tight, it is deleted. Researching ideas and techniques must remain a high priority. The most obvious reason is that you may learn something. Secondly, you may also see how not to do things.

Research is a key element in the development process. Don't skimp on it.

Financing Plan

The financing of your project is a key component. Financing your restaurants development does not usually occur until you have:

  • A solid business plan
  • A termination plan
  • Legal documents for investors/partners
  • A legal business structure/entity
  • Procedures for managing the funds
  • Supporting budgets/documents for equipment needs

It is evident why the development process becomes complex. If funding cannot be completed before other activities are finished, and still other activities cannot begin until financing is in place, your development time schedule begins to expand and individual responsibilities increase.

Operational Plan 

The second critical document of your planning process is also comprised of several components. But you cannot start on this plan until you have completed at least the first draft of your business plan. Keep in mind that as you refine the business plan, changes may occur that will dramatically affect your operations plan.

The draft of the operational plan initiates five key activities:

  • The job descriptions of key management people
  • Staffing needs
  • Preopening plan
  • Design program
  • Menu development

continued next week.......


"Help others get ahead. You will always stand taller with someone else on your shoulders."



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Additional Resources Now Available On Our Web Site:




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 We encourage you to contact us if there are specific subjects you would like to see addressed in "Ron's Tip Jar/Insights".

"Ron's Tip Jar/Insights" is a newsletter discussing issues that affect your restaurants profitability delivered by Ron Santibanez. You may also view past issues of "Ron's Tip Jar/Insights" by clicking here.

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