Penny Wise, Pound Foolish
My grandpa would analyze the price of a can of soup down to the penny. He would then compare cans and shave off two cents between brands. I think that’s what comes from being raised during The Depression. The irony is he would then gamble at the horse track every other weekend. He would blow through whatever money he had saved, and more, hoping his big ticket came in. I find this often in our industry where pizzeria operators are penny wise and pound foolish.
When it comes to promos or guarantees, so many owners are hypervigilant never to let any customer get the best of them and abuse an offer. So hard-nosed that they will suffer sales as a result.
If you offered a 100-percent satisfaction guarantee, no matter what, you will have one to five people out of a thousand that take advantage of it. I realize that it’s super annoying. However, you’ll also gain another few hundred customers that will way outweigh the food cost and agita from those few bad apples. The thought of getting taken advantage of will prevent some owners from seeing the big picture and making more profit. Maybe it’s ego or fear, but it costs money being angry at a few overly advantageous customers.
The same idea of saving pennies on soup applies to purchasing from your vendors. When you’re looking to shave pennies on items you barely use while not paying attention to the market price of flour or cheese, you don’t take the big picture into account. Don’t just price check last month’s cost vs. today’s invoice. Evaluate these costs according to the market trends and be aggressive on that, not on the price of capers. Lock in deals on the items that determine your macro food costs. Don’t get lost in the weeds on your purchasing digging for pennies. I realize the devil is in the details, but the money is on your floor, be hypervigilant there with your customer’s experience. It’s darn near impossible to save your way to prosperity in this industry. Success comes from revenue … significant revenue, that’s the driver.
Find a vendor you trust and let them be profitable with you as you grow your business. Don’t kill yourself over calculations and spreadsheets that don’t move the needle. Don’t get me wrong. You need to be highly aware of your prime cost and your sales. A few pennies on breadcrumbs is not what’s going to be the differentiator between your success or failure. If you applied four hours of work and saved $15 as a result, you have now valued your time at less than minimum wage. If you created a new promotion in that time and only earned ten new sales, that could be a few hundred dollars in new revenue.
When you buy cheap plates, cheap chairs, and cheap tables because you NEED to save money, you now become a cheap restaurant. An investment in these items in your restaurant translates into more substantial sales and higher perceived value. They pay for themselves, not in years, but weeks. Make your restaurant the most inviting and hospitable place imaginable with a comfortable and inviting atmosphere and ambiance. This is an investment, one with a dependable ROI. Better ambiance leads to more customers and a higher check average. This is factual restaurant science based on research. The caveat is, if you go for dive ambiance, then embrace the dive. Cafeteria-style fluorescent lighting with folding chairs is not a dive ambiance. It’s just cheap.
Look for big picture items and stop wasting your time on pennies weekly when you could be churning thousands daily.
MIKE BAUSCH is the owner of Andolini’s Pizzeria in Tulsa, Oklahoma. Instagram: @andopizza