FINANCIAL MANAGEMENT: A pizzeria's crystal ball

Nov. 22, 2005

History does repeat itself, and studying the past helps predict the future. But when it comes to forecasting sales, labor and production pars in a pizzeria, operators need detailed data to ensure profitability in their thin-margin trade.

Thankfully, modern point-of-sale systems deliver the digits that matter to the bottom line.

Marico Thomas is a dedicated data wonk who has learned the value of squeezing every drop of relevant information out of his POS system. As the owner of The Upper Crust Gourmet & Pizza, he uses it to track traffic trends and predict sales with confidence. That information provides him a daily road map that shows him where to go and what to do in leading his five operations.

"By looking at my sales reports for the last six weeks, it projects what my sales are going to be," said Thomas, whose company is on the island of Bermuda. "It compares that projection to what my target is and shows me any variances. It gives me a firm feel for where I am and where I should be."

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Touch Express by Custom Computing

David Henderson, vice president of field technology for Capital Pizza, a 97-unit Pizza Hut franchisee based Wichita, Kan., said his POS's sales forecasting tool helps him teach the company's store managers to schedule labor. For example, the system provides a "job requirements" option, such as the need for two drivers, two cooks and four servers from 11 a.m. to 2 p.m.. That allows him to establish minimum staff scenarios for each shift — all relative to projected sales. If a manager attempts to schedule too many workers, it tells her immediately if she's out of line and needs to cut back. No more waiting until week's end to discover the labor budget is busted.

"We want the manager to see those numbers (change) as they're putting people on the schedule," he said. "There's no guesswork at all. It is what it is."

Detailed enough? Not for Henderson. When the system tabulates labor costs, it factors in payroll taxes and benefits costs. "You get a complete picture of what the cost is going to be. It looks at everything."

Labor forecasting tools also allow schedules to be carried forward and tweaked with ease, according to Duessa Holscher, a partner with FireFly Technologies, maker of the Phoenix Pizza POS system in Hillsboro, Ore.

"Our labor forecast is built on each position, not each employee," said Holscher. "Once you get that set up, you choose who goes in where, and then each week, you simply copy that schedule forward and adjust it compared to your goal." If labor ran high in a prior week, Holscher said the system points out where the variance occurred.

Labor overages really shouldn't happen if operators use their POS systems correctly, Holscher said. Not only do most tell the scheduler if he's high or low based on sales projections — "Ours turns red once you hit the goal" — they track labor in real time throughout the day. An increasing number of operators monitor labor from afar, she added.

"The owner can connect to the system from home and see in real time what the labor percentage is," she said. "If it's high, he can send some folks home. They can make an up-to-the-minute decision without even being there."

Lori Sims, sales manager for Custom Computing, maker of Touch Express POS, said her company's system uses sales projections to set ideal pars for food production. It can tell an operator to make 50 small dough balls and 180 large dough balls for the day and even specify how many should be ready for lunch and dinner.

"Our system generates projection reports for a customer that sells pre-made pizzas," said Sims, whose company is in Indianapolis. "It tells them how many to expect to sell per hour so they can be prepared. ... A buffet operation could do the same thing, too. The report would tell them how many pizzas need to be out on the line during a given hour of the day."

Sims stressed, however, that while a POS system makes calculated suggestions for labor and production, all need an experienced human mind to choose how to act on its recommendations. "There are extraneous circumstances that can affect those numbers, so there has to be to be some

What's Important

POS systems aren't just good for tallying history, they're great for predicting a business's performance.

Expensive as they are, when used thoroughly to monitor labor and food cost, they'll pay for themselves quickly. Add to that gains made from targeted marketing efforts and they become profit generators.

Still, even the best POS forecasting tools are mere advisors to operators. Having a human mind make the final call is key to a pizzeria's success.

interaction there to say, 'We sent out a 2-for-1 coupon a few days ago, so I know we'll be busy.' For the most part, it gives you a really good indication of what you're going to be doing, but you've got to be there to make an educated decision on what to do."

"I'll get to it later"

Not surprisingly, Sims said her larger chain customers are the highest users of Touch Express's planning and forecasting tools. Holscher said much the same; about 25 percent of her customers use them diligently.

"Smaller guys say, 'I don't have time to look at that, I know what I need.' And I understand that," Sims said. "Those guys are really busy because they're in their stores all the time. Plus, since they're there, they might have a better feel for what their sales are going to be."

Multiunit chains, she added, are all but forced into using the planning tools because of centralized accounting processes and streamlined management structures. Chains also know the ability to collect data in one location is crucial to overall performance, maximizing promotional efforts and, as always, bottom-line results.

"With one location, you live and breathe it because you're there all the time and you can get a feel for its traffic," said Henderson. "But with multiple locations, you don't have time to wait for sales history to come back (manually). You want to get those comparisons and see the variances yourself so you can make changes if necessary."

Thomas doesn't go so easy on smaller operators like him. Those who don't use their systems' planning tools have no reason to complain that another operation is outperforming theirs, he said.

"A computer system like this will give you the edge that chains have," Thomas began. "Everyone raves about database marketing as the best thing these do, but the intelligence they bring to your business is the key, I think. The system can pay for itself with its marketing abilities, but labor and food cost management will do it just as quickly."

Thomas said POS systems also should be used as relief valves for weary operators who need time away from their businesses. At a bare minimum, they shave hours off closing procedures once done manually and they simplify planning to the point that an operator who uses one well should get regular time off.

"You hear people complain about never taking time off," he said. "Well, if they'd use their system like they should, they'd gain a lot of their time back."

Topics: Financial Management, Independent Operation, Marketing, Operations Management, POS

Companies: Touch Express by Custom Computing

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