QSR executive walkthrough: next-generation margin control

More senior decision-makers at Quick Service Restaurants (QSRs) are discovering next-generation margin control.

This executive walkthrough explores the issues and opportunities now available, thanks to new tools that offer granular detail and control in previously hard-to-reach areas. 

Do you sense there’s margin leakage somewhere in your restaurant chain — but you can’t quite put your finger on the causes? Perhaps there’s a high load at lunchtimes and then brisk table service during evenings, but you can’t figure why gross profit fluctuates and some venues across your group perform poorly?

For CEOs, CFOS and Operations Directors at QSRs, margin control has taken on even greater significance during the coronavirus pandemic. But it’s also key to being able to scale the business with confidence, fend off competition, and instil extra resilience within your operation.

Let’s take a typical QSR venue in a bustling city centre — and examine the relevance of margin control by walking through its key processes…

Warning signs

In our example QSR restaurant, volumes are high. In fact, it may be serving as a many as 200 customers per hour, through a mixture of eat-in dining and increasingly popular take-out services. The cost of ingredients is high too due to the healthy premium menu options they provide.

But using monthly figures, executives at head office can see this particular restaurant isn’t performing as well as the two nearest venues in the chain. The obvious indicators aren’t showing anything’s wrong. Customer reviews are decent enough and staff morale is good. But the P&L numbers don’t lie.

What executives need is granular visibility into areas such as stock control, production, purchasing and at the establishment. With a legacy point-of-sale (POS), this hasn’t been possible previously due to disconnected processes, data blind spots, errors etc. But with an all-in-one, next-generation system, that changes. Virtually every ounce of data is recorded in real-time, from back of house to front of house and vice versa, and tracked. This unlocks visibility, control and efficiency improvements.

A digital transformation gets underway as executives begin to check the heartbeat of the operation, moment by moment. Before long, the picture become clearer …

Accurate inventory

Until the new system was introduced, the venue’s inventory was shrouded in fog and was an area where no-one wanted to take responsibility. But now, inventory is visible instantly, with staff able to complete mobile stock-takes every day, while in-store actions such as batch production and waste tracking are captured in real-time.

There’s also mobile acceptance of shipments and notifications about missed orders. With all these changes, inventory data can be trusted absolutely, with anomalies easily identified and fixed, and the likelihood or fraud and theft becomes virtually zero.

Optimised ordering

Previously, ordering was based more on instinct than reality. The stock room was overfilling with ingredients and fresh items were being wasted. But now, managers are only ordering what they need and can react faster when supplies are running low. Highly accurate AI-sales forecasts help drive automatic purchasing and preparation plans to eliminate manual effort, errors and inconsistencies.

Food costs are tracked too, so executives at head office can see if this restaurant is paying more than its counterparts — and intervene if this isn’t picked up by managers at the venue. Prices can be regularised and automated purchasing enabled to save time. 

Any suppliers trying to get away with a sneaky order with inflated prices can be identified and fixed – they have complete P&L impact visibility and can drill down to every inventory movement for control.

Production tracking

The restaurant had been struggling to keep a handle on costs in this area too. But the new system includes batch management tools. This means that the ingredients from nearly 20 suppliers —turned into batches of dishes — can be tracked from weighing and prep, through to servings and sales.

Even portion sizes can be monitored and controlled, while wastage is recorded accurately in-store, including any returned dishes and bottle breakage. The new tools are a game-changer for the QSR chain— not only to help control food costs and wastage in real-time, but also optimise menus for price/profitability.

Labour costs

Previously, staff rota management were a major headache and distraction for managers. But now the new system makes it simple to sort staff schedules and notify team members about shifts. Key metrics attached to labour costs provide local managers with a better idea of efficiency. The chain can even use the systems personal page and incentive board to engage employees as soon as they clock-in.

Real-time profit and loss

As the new system is introduced across the group, executives at head office and local managers finally have the insights to turn around performance at the venue.  There’s no waiting for operational P&L figures at the end of the month. Instead, gross profit can be viewed online — and everyone can see if vital metrics are growing or declining.

In fact, it’s possible to see P&L per week, per day, per service session, or by dishes and categories.  Performance can then be checked against other restaurants in the chain.

The outcome?

In our example, margin control has the greatest impact on food wastage — which encompasses inventory and production. For a QSR running at ‘normal’ performance level, this could represent a 4% improvement in margin. For one that’s struggling, the savings can be far greater.

Typically, greater efficiencies of up to 10% are possible when labour costs come into play, menus are optimized for price/profitability, and AI-powered forecasting enables QSR managers to fine-tune expenditure still further.   

A cloud-based next-gen’ system will also allow key changes, such as new dishes and menus, to be rolled out across multiple stores quickly. That way, a QSR chain can keep its offering fresh and exciting — while ensuring it’s always on top of margin control.

Finally, CEOs, CFOs and Operations Directors can make informed decisions about the future of their brand with absolute certainty that the numbers are correct.