In the News / Labor Cost / Misc. Expenses / Benefits o' Booze

During today's In the News segment, I defended pizza: in the $25 and under section of the NY Times dining section, they reviewed Roberta's of Bushwick. They said it was good pizza, but despite that they offered some good interesting dishes. Hrumph!

A good portion of the class was dedicated to labor cost. Based on how busy a dinner shift was, we scheduled servers, bussers, hosts and bartenders, taking into account how much they were paid, expected number of covers and average check. I don't like exercises like this because the feedback you get from it can be guesstimated from just vibing the business of a room. In the resto biz, when things are slow, it's acceptable to send extra staff home, and it's also normal to call up people who are on informal call. Filling us students with formulas and numbers...I don't know, there needs to be a balance, an expectation that we will learn when things really need to be calculated, written and statistically analyzed, and when things can just be winged.

Up to this point, we studied cost control in terms of food and in terms of labor. Today we looked at "other expenses". While a restaurant only has one primary source of income, there are plenty of sources of expenses aside from labor and food.

• Operating expenses (linen, uniforms, china & glass, kitchen utensils, cleaning, decoration)
• Music and entertainment (live or mechanical, ASCAP, booking agents, meals to musicians)
• Marketing (mail, phone, internet, comped food, ads, signs, copies, public relations, agents)
• Administrative (data processing, office supplies, postage, cash over or under, bank fees)
• Facility maintenance (fixtures, equipment, air conditioning, refrigeration, electrical, floors and carpets)
• Occupancy (rent or mortgage, equipment lease, real estate tax, insurance, depreciation, licenses)

This is a very annotated list. If I was working up my business plan, I'd be tearing my short hairs right now...

To control costs like this, there are two key ways to categorize them. The first way is by fixed, variable or mixed. Ask this question: If no one comes to the restaurant one night, will the expense cost less? If people come, will the expense cost more?

Whether people come in or not, rent and salaries will remain the same -- fixed. If no one comes in, I can send lower level salaried people home and the food can be served tomorrow -- variable. If no one comes in, I still have to pay for air conditioning and side towels, but if people come in, I'll have to crank up the air and use more side towels -- mixed.

The other way to categorize costs is by controllable or uncontrollable. Hourly wages are controllable -- if the biz starts to go south, I can cut people's pay or lay people off to adjust in the short term. Rent for a restaurant is usually determined by a multi-year lease -- if the biz is tanking, it could be years to a lease renegotiation, therefore it is uncontrollable.

The last part of the class was more talk of our friend alcohol, which is leading to Monday's discussion on liability issues. Alcohol has beneficial qualities. The wine industry had to sue the FDA to go public with scientifically proven evidence that alcohol can be a positive influence, but still the government insists that bars post signs warning pregnant women away from booze, despite the fact that all the studies from the 80s that claimed alcohol hurts fetuses have all been disproven. It's been shown that moderate alcohol consumption through out pregnancy does NOT hurt babies, and it's been shown that alcohol abuse in the 2nd and 3rd trimesters also does not hurt unborn children. Only alcohol abuse in the 1st trimester, a time when many women don't know they are pregnant, has been shown to cause all sorts of developmental issues.

There's the whole French paradox thing, where despite eating much more animal fats than the U.S., the consumption of red wine keeps down cholesterol. In fact, in recent years the French have had an anti-alcohol (oh, excuse me, anti drunk driving) move that has directly lead to a spike in heart disease. Alcohol thins blood, letting less stuff clump up -- the same rason docs recommend an aspirin a day, only this is so much more tasty and pleasurable. Moderate (2 glasses or less for the averaged size person) on a daily basis has health benefits, but 14 glasses one day a week would lead to all the alcohol problems reviewed yesterday.

Labor / Trends / Alcohol Physiology

Class started with an odds n' ends. Jennilee was at a Mexican restaurant where an old-school piercing fire alarm went off for a solid half hour. She was one f the few people in the establishment, and no one ever came over to explain what was happening, the staff just sat around dumbly, neither moving or calming. What basically had a negative outcome could have been spun positive by just a little human touch, or perhaps a free drink. I told the tale of the miserable meal I had with B at Kelly & Ping in Soho (who the hell fills a shumai with tuna fish and doesn't warn the customer?) Liz and her boyfriend ordered food from Dominos, and had a good time following along on the site as they informed her that her pizza was being prepped, in the oven, packaging for delivery, on the way, etc. Richard suspects it's all a bit of bullshittery, but ya never know.

We crunched numbers on labor costs. Spinning for the # of guests served, labor hours used, average wage and average guest check amount, all sorts of statistics were spun out: labor dollar per guest served, guest served per labor hour, labor cost percentage, etc. A restaurant can be broken down into parts, whether it's simply back of house and front of house or by station, and a sales per labor hour can be calculated for each person. If one part is over or understaffed for whatever reason, these stats will tease it out.

We had a guest speaker from an ad agency who specialized in restaurants and food retail, and was pretty underwhelming. A one-dimensional PowerPoint listed trends this year, some a little interesting, some self-evident, some totally inane. Maybe part of it was the speaker, a lower level rep who was stepping in for someone who got badly bitten by a pit bull. But part of it was their list of current trends: Food as pop culture (with a pic of Rachel Ray in a bikini top licking a fudgy wooden spoon while gazing at the camera with wide dumb cow eyes) is a gimme, as is the local-seasonal-green-community angle. But "blind dining", the trendlette to eat a meal while in the dark or blindfolded? Do I need to pay an ad agency to tell me that comfort food, cheap food and international street food are trendy?

Even more egregious were the tips for guerrilla marketing. First, if I'm going to pay an ad agency, aren't I committing right there to mainstream traditional marketing? Isn't the point of guerrilla marketing so I DON'T have to pay an ad agency? The list of tactics kind of reached this conclusion for me: website, social networking, reach out to food blogs, etc -- all stuff that can be done free or on the cheap.

The only trends that caught my ear was tea -- as an ingredient. People tend to think of tea as 'healthy', and the flavor profiles of different teas could be kinda cool, Another was 'micro-size'. Portions have always been either too huge, or back in the 80s ridiculously small. Reducing portion size to reflect a healthier way of eating AND reduce prices (while maintaining a good food cost percent) kind of turns me on. But for these two cool trends, the agency person spouted silliness like "underground dining", informal food clubs and hosted dinners where instead of being with friends, you pay strangers to enter their homes and eat their food. I think people are doing that to totally escape the reach of douche bag trend marketers....

Class concluded with a look at the physiological effects of alcohol....or more precisely, alcohol abuse. A drink of booze is not such a bad thing. Drinking too much will destroy you. As is the modus operandi of most fear-mongering absolutists (hello, MADD!), what is defined as 'abuse' is never really made clear, but the results of abuse abundantly so.

From a drink, a small amount of alcohol can be absorbed in the mouth. So even if you taste and spit, you can theoretically get drunk, Down the throat, alcohol is toxic to the lining of the esophagus, and abuse will increase the chances of cancer here. In the heart, abuse will raise blood pressure and increase heart size due to increased fat. Most alcohol is metabolized in the liver, where abuse will turn it into foie gras -- fatty and enlarged, a.k.a. cirrhosis. Twenty percent of alcohol enters the bloodstream through the stomach, where too much will tear up stomach walls and have all sorts of pleasant symptoms. Most alcohol enters the blood through the small intestine, which is why a vodka enema is so dangerous. Inflammation, pain, bleeding, I need not write more.

And the kicker to this is what the U.S.A. now defines as abuse: the legal definition of alcohol intoxication. A blood alcohol level of .08% makes it illegal to drive. That's one drink for a petite woman, 2 drinks for the majority of the population within one hour. If that is 'abuse', then we are a world of abusers. Who says prohibition can't happen again?

Introduction to Beverage Management

The day kicked off with a long missing in the news segment. According to daily freebie AMNY, food stylists actually take pictures of inedible things that look edible! Shocker! Down where the old Fulton fish market used to live on the old southern tip of Manhattan, a new foodie market is emerging. After seeing the new fish market up in Hunts Point, which is literally the middle of nowhere, it's nice to see a real market pop up where the people are.

Richard covered the history of the beverage -- from the dawn of man to its presence on today's college campuses -- in a few hours with enough time to spare to show a documentary about the U.S.'s 13 years of Prohibition. In the beginning, there was water, and it was good. Juice from fruit and extracts, too. About six to eight thousand years ago, alcohol was not so much discovered so much as stumbled upon. When a sugar or starch is introduced to yeast in a properly moist environment, fermentation occurs. Yeast eats the food and produces CO2, heat, and alcohol. The first naturally occurring alcohols to be consumed by man were most likely fruit-based, as the grain-based fermentation take a bit of processing of the grain.

In early history, alcoholic beverages became the go-to daily drinks for health and hydration because it was safer. No one knew why relieving one's self in the same river from which you drink was a bad idea, and they didn't know why that water made you sick (while the beer and mead made from the water did not). It was a short step to steeping healing herbs and berries in alcohol to create tonics and elixirs that also happened to get you messed up. Gin, that's simply distilled alcohol steeped with juniper berries.

Distillation was introduced by the Moors, most likely for the purpose of making perfume, not drinkin'. Distillation is simply cooking the fermented beverage, collecting the evaporated alcohol, and re-condensing it. This process lead to stronger, condensed alcoholic beverages that could travel longer than an unpasteurized beer. Ahoy, pirates and brandy! Colonists ditched the boats at Plymouth Rock because they were out of beer. There was nothing else safe to drink unless they went inland.

All major religions at one point or another embraced alcohol in ceremonies, as alcohol was revered for its safety and pleasure-giving qualities before the establishment of religion as we know it. That said, due to alcohol's ability to be transcendental and give relief, it was also in conflict with certain aspects of religious practice, and has been suppressed by all sorts ever since.

The young United States found that towns tended to have two social centers: the church and the saloon. In the Church, you sat there and got spoken to. In the saloon, you socialized, you pleasured yourself, and the business of the day got done. Politics were at the bar. The problem with this formula was that saloons were all male (unless you were a certain kind of lady); it was this imbalance of power that lead to the original women's movement being focused on temperance.

We watched a documentary on Prohibition, during which the United States basically destroyed all the foodways that anchored society to a healthy perspective on alcohol. The ban served to do exactly the opposite of what the banners hoped: alcohol consumption rose, a large criminal underground swelled, people drank more for the pleasure of being naughty, respect for law and government was eroded, and in the end one group emerged as drinkers where they never drank before: women.

To this day, the United States is under the yoke of the aftershocks of Prohibition. When Prohibition was lifted, a lot of the controls on booze that were introduced remain n effect today. Why? Because the government can closely track -- and tax -- all alcohol being produced. Food consumption is easy to fudge; not so with booze, from a restaurant's liquor license down to a distributor's tight controls on inventory. It's just too profitable for the government to let go of. Now imagine if the government did to marijuana and prostitution what it does to booze and ciggies! We'd fuck and bong our way out of the recession...

There is a mini-Prohibition going on in college campuses today. It's a weird situation in which part of the social community is under 21, another over, and they both hang out. Underage drinking is the standard, and lately college presidents have called for a review of the drinking laws....after which they were mercilessly attacked by Mothers Against Drunk Driving (among other naysayers) who don't appreciate that history repeats itself: ban booze, and people flout the law, drink more, and do more damage than if it was not banned. -sigh-

It's nice not to fall asleep in class!

Labor

After the last few days I've had (with my wife going into false labor), the subject of the class gave me a sore giggle. The food cost of a hamburger is pretty straight ahead: add up what the meat patty cost, what the bun cost, what the bits of topping costs, add 'em up, and you got your food cost. But adding up the labor cost isn't that easy: if a cook is earning $8 an hour and turns out one burger a minute, it's $1/burger, but what if he's cooking up 1 burger at a time when it's slow, and 20 at a time when it's slamming? And what about what it costs for the server to bring it from kitchen to table?

The rest of class was dedicated to discussing the pros and cons of fixed pay (salaries) versus variable pay (hourly wages), and a lot of different formulas to figure out ratios and percentages which which I doubt any restaurant with less than 100 seats ever really concern themselves. I'd go into it more in detail here, but to be honest, I'm suffering a bit from baby fever, and the baby that is soon to be upon us....

But one formula did catch my eye, because I wish I could plug in the numbers and show it to my current boss. Turnover rate = # employees separated / work force. If a place has 50 employees and loses 50 employees over one year, that's a turnover rate of 100 percent. Some places, particularly fast food joints, are notorious for having turnover rates of 200 to 300 percent (i.e., the whole staff turns over 2 to 3 times a year). The cost of turnover is in expending the resources to find new employees, train them, and all the mistakes they're going to make by being new. The main ways to reduce turnover rates: TREAT YOUR EMPLOYEES WELL, pay them fairly, schedule to their needs, benefits, etc. -sigh-

Pork and Poultry Fabrication

Today's class was again up in a kitchen, with Chef Ted fabricating a side of pork and a few birds. This would be pretty exciting to see this demonstration, except for the fact I spent a few weeks fabricating pork and poultry first hand in c-arts. Watching some one else do it, and talk about it, is, well, unsatisfying. I did like Ted's brief lecture. It seems there are three general classes of pork in the U.S.: Western, Southern and "Metropolitan" or "Swirl", which are defined by where they are raised and the feed they are given. Western pork get a diet that is composed around chestnuts and apples, while Southern centers on peanuts and soy. "Metropolitan" tends to be raised outside of cities, and are primarily fed....denatured food garbage. Mmmm. Because pigs can pop out of a litter of 50-60 piglets every 6 months, pork has always been cheaper than other meats. Too bad about that kosher/halal business.

Yield & Purchasing / Menu Pricing / More Yield Tests

We began class with a review of yield and how it influences product purchasing. Vegetable scraps can be saved and used in vegetable stock. But if you're making beef stock at a steak house, the cost of bones can be significant. So your meat purchasing will be influences. The cost of buying subprimals (parts of the animal, bones and fat and all) and the cost of buying fabricated meat (deboned, trimmed of fat, cut to edible portions) change when you have a use for the bones that would be missing in a fabricated cut.

We spent a few hours discussing product pricing. This is determined first by the kind of menu the establishment has. For a cycle menu: one with a fixed daily menu (like in a corporate cafeteria or prison -- what's the dif?) prices will be determined to an extent by the limitations that the host has determined. The law firm where I worked, for instance, had a cheap-ass caf with good food, undoubtedly restricted by a contract the food service had with the firm. Also, because the menu changes every day, the uses for carry-over (a.k.a. left overs) are more limited, thereby raising food costs. In a school cafeteria, today's hamburgers can become tomorrow's chili, but a corporate cafeteria's clams casino is a little bit more tricky.

A restaurant's menu that changes completely everyday is tricky because of the carry-over issue, but gives the flexibility of going to market every day and getting what is fresh and cheap, though in smaller more expensive quantities. A standard menu can have specials, which can use up what's in excess or what's cheap at the moment. Specials have to be thought through, or a "creative" chef can drive up the food cost of a special into unprofitability.

Factors that influence menu pricing:

• Local competition
• Service level -- table vs. counter service makes a perception of quality, and determines turn time of the tables
• Guest type -- what are the customers willing to spend?
• Product quality
• Portion size
• Ambiance
• Meal Period -- a.k.a. dayparts. Weekends can get a premium over weekdays, dinners get more cash than lunches,
• Location, location, location
• Sales mix -- different menu items will be more profitable than other.

There are different ways to assign a menu price, and a lot of places use the dumb cudgel of the food cost percent. You can assign a 20% food cost to everything (if a dish costs $4, you charge $10) but if the food cost of a steak is $25, the cost of a pasta dish is $3 and a glass of lemonade is $.03, the perception of a $125 steak and a 15 cent glass of lemonade will seem a bit crazy to a customer.

The desired cost percent can be determined by looking at what the other expenses of the restaurant are. If sales = 100% of income, fixed costs like labor, occupancy, desired profit and operating expenses can be subtracted to find what % of the income can be dedicated to the cost of the food.

The number that is much more important than the food cost percent is the number where the money is: the Contribution Margin.

Contribution Margin = Sales Price - Cost

Also known as the Gross Profit, the CM is not a percent, it's the MONEY. Alternately, the Sale Price = Cost + Contribution Margin. A steak house typically has a huge food cost and a tiny profit margin, but because steaks go for hundreds a throw, the contribution margin is going to mean big profits regardless.

For the remainder of the class, we revisited the butcher test card and theoretically broke down a whole chicken, which had a lot of parts: drumstick, thigh, wing, back and neck, giblets, waste, and breasteses. Each part has a different value per pound. Literally, the value of the whole chicken is not necessarily the sum of the value of its parts. Hence, supermarkets love to sell chicken parts because the perceived value is a lot higher than the perceived value of the whole carcass. Mmmmm, carcass.

Odds n' Ends / Production Cost Control / Guest Speaker

Back from the weekend, we shared some odds n' ends. Some Japanese fellows got a machine to detect flavor, and determined that humans taste like...bacon. Someone popped a snake head into a dish at TGIFridays in hopes of landing a big ol' lawsuit. I told a story from my weekend, how L fired the hostess between lunch and dinner services, forcing me to step in to help, wearing a kilt, wet shoes, and a t-shirt a few sizes too small. It was an experience.

We got into cost control in food production. Turning the "as purchased" portion into an "edible portion" is an ordeal with a lot of opportunity for waste. If the minimum-wage prep cook is not monitored, for instance, he may cut an onion and toss out too much usable trim. It's not unusual for head chefs to pick around the garbage to inspect what is being thrown out.

Overcooking is another problem -- cook a piece of meat too long and it shrinks. Over the course of a year, one can lose 100s of pounds of meat And of course there is over serving: a bartender free-pours too big a glass, steak that's not weighed could go too big or small.

Inventory control: Without proper rotation, a lot can be wasted. "Carry over," the restaurant term for left-overs, is a big potential source of loss if not managed correctly.

The choice to make or buy something is tricky. Ice cream can be purchased, but the ingredients are relatively cheap. However, a proper batch freezer, electricity to run it, and the talent to run it are not. It's a balance that his to be determined from case to case.

Of course there are the twin buggaboos of pilferage and stealing: stealing is cut-and-dried taking stuff out of the store, either booze or cash or sides o' beef; pilfering is more casual, such as the hungry prep cook popping a few cucumbers into his mouth while getting the salad station together. Then there are the employee meals -- are they expensive to make or made with food that would go to waste otherwise?

This list killed me, as I see how the restaurant I'm at now is just being so wasteful, preventing us from getting on the goodfoot financially.

At 10pm, we had a guest lecturer, Anne Saxelby of Saxelby Cheese, a cool little cheese counter on the Lower East Side. She sounded really interesting, pretty much inventing herself as a cheese monger, but I was overtired and fell asleep.