Kabob House Slashes Prime Costs from 72% to 61% with Restaurant365

Background

Kabob House was established in 2009 with a modest 600-square-foot restaurant in Yakima, Washington, and a commitment to offering delicious and health-conscious Mediterranean cuisine at a reasonable price. Patrons recommend starting with an appetizer like gourmet falafel cakes with homemade tzatziki, stuffed grape leaves, spanakopita, or baba ganoush. Regulars swear by entrées such as shish kabobs, moussaka, souvlaki, salads, and pita sandwiches — and love to add on a bowl of homemade lentil soup for just 99 cents. Thanks to all the delicious food, coupled with courteous and speedy service, Kabab House has already expanded to six locations across Washington staffed by 60+ employees. Over the next five years, owner Ahmed Baqer hopes to open 20 to 25 new locations in Washington, Idaho, and Montana, and might consider franchising.

Needs

All-in-one Accounting

Fully-integrated Analytics

Multiple Restaurant Locations

Challenge

There’s nothing like business success to highlight the weaknesses inherent in manual processes and point solutions. By the time Kabob House had grown from one restaurant to three, Mr. Baqer had already become acutely aware that his basic, PC-based accounting tool was not an effective way to manage his existing locations, let alone be prepared to open the new ones he was planning. Instead, he realized, he needed a modern solution — ideally, one that offered accounting, operations, and scheduling in a single platform, as well as integration with his POS system and bank.

“Our old accounting software, AccountEdge, ran on just one computer, which made it very difficult to manage the three locations we had at the time,” explained Jaylene Shafar, Restaurant Coordinator at Kabob House. “Moreover, it was limited to accounting; there was no operations functionality, and it definitely didn’t have any scheduling features, so we would have needed to invest in separate systems for those areas.” She also noted that the accounting system couldn’t link with any POS system, so it required a great deal of manual data entry — another huge roadblock to growing the business.

Solution

Mr. Baqer identified and evaluated several tools, including Restaurant365, which was recommended by his POS vendor, Toast. “Restaurant 365 had a much cleaner interface,” he said. “It was very easy to read: Even though it had a lot of functionality, I could easily find what I need. And I really liked that R365 integrates operations, accounting and scheduling in one product.” Soon, the solution was up and running at Kabob House.

Results

That was less than two years ago, and Kabob House has already reaped significant returns on its investment. Because Restaurant365 offers accounting, operations and scheduling as part of the same platform, along with integration to his POS system, the system affected his entire operation.   In fact, Mr. Baqer reported that he has been able to achieve a massive reduction in prime costs using the solution:  from 72% to 61% as a percentage of sales, thanks to a whopping 5–6% drop in both labor and food costs as a percentage of sales.

He credits the impressive savings to the deep insights he gets with the solution’s clear, comprehensive reports.  “If you don’t have the numbers, you might think you’re making money when you’re not,” he said. “With the P&L report in R365, we can see the numbers for every location side by side, and the numbers never lie. I saw that if we could reduce labor by 2%, we would save around $40,000–$60,000 a year. Thanks to R365, we’ve done even better than that. We were at 40-46% for labor. Now it’s between 35-38%. Overall, we’ve saved about 5% on labor as a percentage of sales.” Ms. Shafar noted that a significant portion of savings on labor came more from the administrative side due to the elimination of manual data entry and some other unnecessary costs. “Now, our labor costs only increase as we staff up for new locations.”

At the same time, Kabob House has been able to reduce food costs by 6% of sales, from 32% to 26%. Mr. Baqer noted that he no longer has to guess about how to price menu items because R365 provides an out-of-the-box report called the menu item analysis that accurately calculates the cost of ingredients that go into each menu item. As a result, he can not only ensure that he will make a profit on each menu item but know exactly what the margin will be. In addition, R365 has enabled him to establish proper control over his inventory, so there is less food sitting on the shelf and therefore less waste.

Beyond the incredible prime cost savings, Mr. Baqer credits the solution with enabling him to rapidly expand his business. “Restaurant365 is the main reason we were able to add three more locations over the last nine months,” he reported. “We used to have to enter daily sales by hand, and even with just three locations, it was a nightmare. If we’d had six locations like we do today, we would never have been able to get it done. Automating the process with R365 was critical to being able to grow. Between the AP automation and bank reconciliation features of R365, we are saving 650 hours per year on accounting time alone.”

With R365, accounting is not just dramatically faster, Mr. Baqer hastens to add — it’s also measurably better. For example, in detecting vendor price increases or errors. “Even small price changes really add up when you’re being overcharged week after week,” he said. “Now, R365 highlights price discrepancies right on the screen, so we see these issues right away. That has enabled us to save $200–$300 every month.”

In addition to price discrepancies, Restaurant365 detected another way money could potentially leak out the business. With the rise of mobile banking, employees often do not surrender their paychecks when they cash them — and sometimes they try to deposit them again later, either by mistake or on purpose. “Thanks to R365, we have spotted a number of instances in which employees deposited their checks a second time, so we were able to have the bank reverse those transactions,” Ms. Shafar said. “Before R365, the manual reconciliation process was so difficult that we might not have even noticed the duplicate payments. It’s just another way the solution has helped us save money.”

Numbers never lie, but they sometimes don’t tell the whole story, either. Beyond the quantifiable benefits, Kabob House has found a lot to love in Restaurant365, which can be summed up in just one word: “easy.” For example, Mr. Baqer pointed out that because the solution is cloud based, staff members in different cities can “easily collaborate.” Ms. Shafar noted that staff can “find transactions easily” and even “easily attach photos” in case they ever need to go back and verify something on an invoice, such price, quantity or item purchased.

Both Mr. Baqer and Ms. Shafar recommend Restaurant365 without hesitation. “Honestly, I’m more than happy to pay for R365 each month,” Mr. Baqer said. “It’s a great tool that is already saving us a lot of money, and they keep improving it all the time.”

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