Imagine a scenario where your group rocks up to a restaurant for dinner.
The waiter grabs a pen & meticulously writes your order on a notepad. Then goes over to the POS, waits for it to be free and manually enters the order again.
There is a problem. Perhaps the waiter has forgotten to ask how you want your steak cooked, or what sauce you wanted. Maybe the kitchen have run out of the dessert you ordered.
So the waiter comes back to your table and clarifies the order, before returning back to the POS so the order can eventually be sent to the kitchen / production printers.
Pen and paper are cheap. For this one order the amount of time you pay your waiter is minimal.
But what about the opportunity cost ?
Opportunity cost is an economics term that refers to the value of what you have to give up in order to choose something else. In a nutshell, it’s a value of the road not taken.
Let’s look a the above scenario and see if we can identify the opportunity costs.
Pen & Paper have a definite cost to buy. Think of them as an ingredient used to make a dish that you will serve to your customer. Would you use an ingredient that did not increase the value of your food ? One that you could not put a mark up on ? In the overall scheme of things the cost is low, but what if you used that expense to instead create a fabulous pasta sauce that you could then sell, at a markup ?
We have already decided that the value you pay the waiter for the time is also comparatively low when looking at a single instance. But what could the waiter be doing instead of waiting for the POS to be free and / or entering the entire order again ? What could he / she be doling instead of going back to the table to clarify / change an order ? That same amount of time could be spent taking another order or bussing a table. Turning over tables during a service is key to your business, not spending time waiting for the POS to become free, clarifying an order or doing double entry.
I often say to business owners that their money does not come from the table or front of house – their money comes from the kitchen. The quicker your waiters can get an accurate order to Chef, the more orders he can get onto the pass during a service. Which leads to a higher table turnover and patrons.
If you were to add a dollar value to this one instance, it would not seem to be all that much. But multiply it by the number of orders you take during service. Multiply that by the number of days you are open a week. Multiply that by about 4 to get an opportunity cost for a month. Multiply that by 12 for a year.
“look after the pennies and the pounds will look after themselves”
Philip Dormer Stanhope 1647
“work smarter, not harder”
Allan F Mogensen 1930’s
One of these quotes is ‘only’ 90 years old – the other is from 373 years ago.
But as we come out of Covid 19 and are looking for ways to keep our businesses open and viable, they apply more than ever.