Food Costs, Labor and Sales

¶ … Food Costs, Labor and Sales

One of the biggest challenges that all restaurants are facing is: high food costs and labor issues. These factors can eat into the underlying profit margins of a company. At the same time, declining sales are an indication that something is wrong in the products mix and the services they are providing. In the case of the restaurant that we are examining, all three of these different elements are having an impact on the establishment. The most notable include: food costs have increased by 50%, there are not enough skilled employees and sales have declined by nearly 25%. As a result, we need to evaluate and provide solutions for addressing these issues. Once this takes place, we can offer specific insights about what the restaurant can do to deal with these challenges. This is the point that their underlying profit margins will begin to increase.

The Effects of: High Food Costs, the Lack of Skilled Labor Positions and Declining Sales on the Establishment

The impact of high food costs and the lack of skilled labor can act like a cancer on a restaurant. The reason why, is because the high food costs will eat away at the underlying profit margins of the business. While, the lack of skilled labor will mean that the quality of food and the kind of services will begin to decline. This will have an adverse effect on the restaurant that we are examining. As, it will cause customers to: go elsewhere and the profit margins of the establishment will dramatically decease. This problematic, because once this occurs it will lead to unfavorable views of the restaurant. At which point, it becomes difficult to for any kind of establishment to win back the trust of the community. (Beriss, 2007, pp. 65 -- 78)

In the case of restaurant that we are examining this is what is happening with food costs increasing by: 50% and the there is a lack of skilled labor. This has been having an impact on the products that being provided and the kinds of services that customers are receiving. As a result, this has led to a decline in sales of 25%. Over the course of time, these factors will have an impact on the economic viability of the establishment. This is when there is the realistic possibility that the business may not be able to stay open. To prevent this from happening, management needs to engage in some kind of drastic actions that will allow the establishment to regain market share. If this can occurs, it will allow the business to rebuild its image with customers and improve the quality of the products that it is delivering. (Beriss, 2007, pp. 65 -- 78)

Solutions for Addressing the Problems that are Impacting Our Restaurant

To fully provide extensive solutions, we first need to discuss the specific reasons surrounding what the establishment is facing from the above mentioned issues. As far as food costs are concerned, the increase of 50% is a sign that the company has extensive amounts of food waste. This is when they are throwing away more food than is being served to paying customers. At the same time, they could be giving customers greater amounts of free items than are necessary (i.e. napkins, paper cups and plastics utensils). This is problematic, because it means that the underlying costs for these items will begin to increase exponentially. At which point, the expenses for food and other items will skyrocket. Given the fact that they are up so much, this is a sign that this is what is occurring. As a result, managers need to be able to control the amount of food that is being thrown away and how condiments are dispersed to customers. If they can be able to achieve this objective, this will help to reduce these costs. This is when the underlying profit margins of the restaurant will begin to increase. (Brown, 2003, pp. C4-1 -- C4-16)

The lack of skilled labor is an indication that managers may not be paying enough for select positions on the staff. This is troubling, because it means that those individuals who have experience in working in the industry will more than likely find employment with competitors. Once this takes place, the overall quality of the food will begin to decline. This is when the attributes of the products and services will change, which will have an adverse impact on the organization. Over the course of time, this will affect the reputation of the establishment. To deal with these challenges, managers need to seek out those individual who are more skilled and offer them better forms of compensation. This will help the restaurant, to address issues surrounding the quality of food and the kinds of services that are being delivered. (Brown, 2003, pp. C4-1 -- C4-16)