Pizza Today - July 2020 - 35

Some marketing efforts have a
distinguishable return on investment. A coupon with a code attached
can show you definably how much
return it produced. A top-of-mind
awareness ad won't. That doesn't mean it
doesn't hold value or should be abandoned.
For example, let's evaluate a $75 ad
in a high school musical program. No,
you're not going to make a ton of money
off this investment. No, the audience
members who see this black and white
ad in the corner of a play's program
aren't going to be the factor that saves
your business. Before you pull the plug
on the ad, realize this marketing isn't for
the people in the audience, it's for the
kids in the play. If you've endeared yourself to this school and by default, their
families, then they are now potentially
loyal to you. They might not be, depends
on how much they care about businesses that support their program. Are
these high school kids and their families
coming in as a result of this effort, and
will they stop coming in if you don't buy
this ad? If that's the case, then this ad
is working in a roundabout way. Before
you abandon something, evaluate the
scenario and decide, will this investment
pay itself back times five in the next
365 days. If so, it's worth keeping. That's
the long-sighted as opposed to the
shortsighted viewpoint you need to take
before you start reducing costs.
That's my marketing metric. Will this
investment yield five times its cost? Revenue I would not have seen had I not
spent the money. If so, KEEP IT. I say
five times because if I spend $100 bucks,
and it yields $101 it's a loss. You're out
the food cost and labor cost it took to
get you to that $101 in revenue. At five
times revenue you are in the profit zone.
In the case of a superfluous monthly
charge for something that has yet to
produce an ROI, that needs to get
reevaluated that and potentially cut. But
then those dollars need to be reinvested
into things that are working. Do this
because you need revenue and reducing
your marketing budget is not the way to
procure it.

Food Cost & Labor
Your two most substantial expenses in
a restaurant are your food cost and your
labor cost. For food cost, can you cut the
price you pay to acquire certain items?
If you negotiate a better rate with your
vendors, then yes. But, if you decide to
short change the customer, give fewer
toppings, or buy a lesser quality item,
it will be a shortsighted gain that hurts
you in the long run. Cutting quality
is not the answer. Reducing spend on
existing products is the answer.
You can increase menu prices, but
that might not be an option for you.
To reduce costs correctly, you can buy
something in larger quantities or renegotiate your price structure on big mover
items. For example: Ask your primary
vendor to lock in your price on flour for
six months with a guarantee that you
will only buy from them. If your primary
vendor isn't playing ball, this may be the
time to entertain other vendors. Find
the vendor willing to lock in deals and
value your relationship.
Bad labor cost-cutting can create an
immediate morale dip that tanks your
restaurant. Reducing hours of your
core team or worse, taking down their
salary, will immediately destroy their
will to work. If you remove extraneous
employees and cut hours to those who
have performance issues, yes, this will
have an effect that's positive. It might
even be appreciated by those of your
staff who are working harder than most.
If you invest more time in training new
employees along with cross-training
existing employees, you will get more
value out of them all. That will, in turn,
reduce costs.
If your blanket statement becomes,
"No one's getting a raise no matter
what this year," your staff will grow a
sense of antipathy. Instead, switch to
a performance pay model where when
you win, they win, which will solve both
purposes.
Fixed and variable expenses round out
the rest of your purchasing. Fixed cost is
fixed, so not a lot of wiggle room there.
The variable cost is where you want to
spend your time and effort to reduce

your monthly output and streamline
your cash flow. Start with the most
substantial items and initiate a negotiation, regardless if you have a contract or
not. Speak with that vendor and air your
concerns. If everything's going great,
you still have the right to say, "Is this
the best possible price we could be getting, or are there any other changes that
could get us a better rate?" These are fair,
ethical questions you should and need
to ask at a minimum yearly. Cell phone,
laundry and insurance are all variable
items that need a meeting with your
rep from that vendor. Go through every
company that you spend money with
and have an honest and open dialogue
about their cost-effectiveness. Before
switching every vendor to the shiny new
vendor promising savings, remember the
idiom, "Better the devil you know than
the devil you don't."
Tax write-offs are a painless, effective
way to save money. There are several
CPA firms across America whose sole
purpose is evaluating your tax implication. They find nuanced ways to reduce
your tax exposure. These are not people
who file your yearly tax return but rather
people who game restaurant tax codes.
The beauty of companies like this is they
typically take a portion of the money
they save you, so you're out zero cash.
Meanwhile, you're getting the money
that you would not have been able to
find otherwise. They accomplish this via,
depreciating your equipment differently
to employee hiring incentives that you
might not have been aware of.
If you believe your brand and menu
is right, don't hurt it for the sake of cost
savings. Change your back-end purchasing as a first recourse.
Ideally, you change nothing of your
menu. For your staff, your goal is for
morale to increase along with revenue
via smart decisions and a thoughtful
approach to your cost reduction. n

MIKE BAUSCH is the owner of Andolini's
Pizzeria in Tulsa, Oklahoma.

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