An important tool is emerging as an undisputed victor from the ashes of the 2008 recession, the subsequent dramatic rise in commodity prices, and other escalations in restaurant operating costs. Sophisticated restaurant operators are beginning to use Business Intelligence software (“BI”) to manage increasingly volatile P&L statements where utilities, insurance, food costs, paper costs, labor, and other line items have lost their traditional predictability. Some of the leading restaurant business intelligence software packages, such as those provided by, Delaget, Xformity, and InfoSync, (there are others developed by franchisees and franchisors) allow restaurant managers to use data in order to plan and control operations with more precision. They are also afforded a finer look at data which allows them to identify and eliminate waste. We have noticed significant economic benefits among operators who use these tools to track, evaluate and improve their performance.
Once a restaurant operator has implemented a BI system, one of the first things they will notice is the variance in the performance of individual stores. These software tools help to identify not only specific store level variances, but also the portion of the cost which is explainable versus that which is not. For example, if a KFC district manager is reviewing his or her stores, there very well may be a store that features a buffet serving format. The store will undoubtedly have a higher food cost due to historical norms of this serving format. This is considered an explainable variance from the company’s average food cost. However, if the number is too high there will be unexplainable components in the food cost which will be underscored by the use of business intelligence software. Generally, unexplainable variances are due to human behavior which can usually be corrected and mitigated. This allows for more consistency in management and ultimately higher profitability.
Employee cost is a key line item in which business intelligence software has been able to provide value to its users. Fingerprint scanners can be directly connected to a manager’s PC and give real-time reporting on employee start and end times for their shift, breaks, and meals. Business intelligence software can also be used to notify managers when people need breaks or if they are about to exceed overtime according to local law.
Another very valuable labor-saving potential of the BI software is to comprehensively analyze labor scheduling for restaurant operators. These sophisticated planning tools take into consideration prevailing and historical weather, current and former advertising modules, movable holidays, recent volume, current LTO and POP as well as recent shift labor averages. This comprehensive forecasting tool vastly improves labor efficiencies over traditional methodologies used in the industry.
Historically, restaurants had very generous store operating profits and were slower to embrace technology beyond the point of sale devices. Restaurateurs’ slow adoption of these technologies comes in sharp contrast to other industries which featured leaner profitability and necessarily more sophisticated systems and cost controls. However, increased restaurant development, rising costs, and intensified competition have eroded restaurant operating profits and increased business risk. This has given rise to a dramatic increase in the popularity of BI software throughout the industry. Restaurant operators have come to realize that the BI software pays for itself through lower costs and more improved operations and customer service. Franchisor executives are quick to point out to us that the advent of this development has remarkably impacted the performance of those franchises which have embraced it. BI pays for itself.
Author: Kevin T. Burke, Managing Director – Trinity Capital LLC