Small Business
Changes in Marketing for the Restaurant Industry
Tuesday, April 17th, 2012
By Harris Eckstut
The restaurant business is a retail business – the one major difference, however, is that we manufacture the product as we sell it. Most marketing and merchandising rules and concepts of restaurants are therefore based on retail models.
When it comes to dining, our tastes as a culture are always changing; much like the style of the clothes we wear. Accordingly, restaurants should always be one step ahead of the game in taste, service, and marketing.
Certain segments of the general public may think blue jeans are always in style and acceptable, so the good old-fashioned staples of diners and burgers joints will always be in fashion. However, those wanting to bring in customers based upon innovative trends must have the edge on new concepts and promotional ideas.
In the past few years, cyber marketing – especially to the younger generation — has become the most dominant form of out-of-store promoting: Facebook, Twitter, and the all the other Internet stuff we old folks don’t quite understand yet.
Here’s a classic example of today’s marketing for entertainment in restaurants and bars: In the old days, restaurant and bar owners would listen to the band, track a its previous performances, determine whether it was popular enough to bring into the his/her restaurant/bar and then pay for ads in the papers, print and distribute flyers, etc. Today, bar and restaurant owners will ask the band to justify their popularity by sharing how many people it has on its Facebook. If the desired critical mass is insufficient, the bar owner doesn’t even bother to hear the band play before saying, “No.” If it does have the minimum – let’s say 1,000 – then he or she will listen to the demo or see the band play to determine whether it would be the right fit.
Marketing expenses is an all-inclusive line item. For most table service and quick service restaurants, the rule of thumb for a marketing budget is 5% of sales. I no longer call this line expense “advertising”. Nowadays I try to stay away from that term because it has the connotation of expenditures for paying for the traditional media of display print, radio, etc. And, although these “advertising” expenses are a part of the marketing expense equation, for restaurants – because of other promotional expenditures – it is limited. These other costs would include maintaining the website, cyber communications, and coupons/discounts/comps.
Usually for table service restaurants, and especially bars, the largest component of the 5% marketing line item expenses are the coupons, discounts, and other “freebies” we in hospitality “give away.” They are a critical component of promoting the business, but must be monitored carefully before one winds up paying people to eat and drink for “free” in your business.
These “freebie” expenses are dollar for dollar line item expense. Do not fall into the illogic of thinking that the hamburger only costs 25% – the price to you of the meat and roll – of what you charge for that burger. All the other costs of servicing that hamburger to the customer are always in place: the costs of the cook, server, dishwasher and server, the utilities, the rent, the insurance, etc., etc.
To further explain: A salesperson for a discount coupon book pitches his “book” by telling you that a $10 coupon only costs you the $3.00 for the food. He/she is very wrong. The $10 coupon costs you $10 – unless you have a profit margin of 5 or 10% — then it costs $9.90 or $9.95. Always remember that the costs of labor, utilities, rent, insurance, and all the other costs of doing business are connected to an item such as this discount coupon. So, if the ad costs you more than 5¢ or 10¢ a person, you are paying the customer to eat at your restaurant.
The other way to look at it – especially if you have a Chef working on a bonus by meeting the food cost budget - is “don’t charge (blame) the Chef for your marketing and advertising expenses.” (He or she is already temperamentalJ)
Posted in Restaurant Notes | No Comments »
Reaffirming the Benefits of Small Business Owning Real Property
Thursday, March 1st, 2012
By Bruce J. Coin, Director, Bruce Coin Consulting, Inc.
The SBA 504 small business loan program can facilitate a small business owning an office or industrial building, a restaurant or other property type as never before. The 50%, 40%, 10% program provides up to 90% financing and requires only 10% equity. For “start ups”, and “special use” properties there is the 50%, 35%, 15% program that requires only 15% equity. Alternatively, the 504 program also allows a company’s principals to own the real estate and lease it to the company provided that the “owned company” occupies a minimum of 51% of the real estate.
Most small businesses strive to build value in their company. Over time, they hope to sell and use the money for their principals’ retirement or other purposes. In the interim the business usually provides a nice living and benefits.
History has demonstrated that when a small business is sold, more often than not, the bulk of the sale proceeds are not attributable to the capitalized value of the company’s ongoing annual net profits but to the value of its owned real estate, the value of any equipment notwithstanding.
To dramatize the affect I have created a hypothetical situation below. Perhaps it mirrors something you are contemplating.
EXAMPLE:
Assume that you have a 7 year old light manufacturing business that has out grown the 10,000 s.f. space it leases for $5.00 s.f. fully net. You have found a15,000 s.f., 20 year old, one story, rectangular shaped industrial style building on a 2 acre site in fair condition. After some negotiation you know that you can purchase the building for $30 per square foot or $450,000. You like the location as it is near your current operation so you won’t lose any employees in the relocation.
You really would like a 20,000 square foot building for future expansion purposes. The size of the lot, the zoning and physical location of the building on the site permits a 5,000 s.f. addition being created to one end that will continue its utilitarian design.
You will own the real property and lease it to your company. As you initially need only 15,000 s.f., you know that the 504 program allows you to lease or sub-lease up to 49% until your business can utilize all of the space. You offer the $450,000 and it is accepted. Your agreement of sale, among other clauses, is conditioned upon obtaining all governmental approvals to build the 5,000 square foot addition and as well as obtaining SBA 504 financing for 90% of your total cost.
You hire an architect to design the addition and oversee construction. You also need to install a new roof, refurbish and expand the office area, add and upgrade the HVAC system and install three on grade overhead truck loading doors to facilitate your shipping and receiving departments. The cost of the addition is $70 per square foot or $350,000 including the architect’s fee, general contractor costs, permits and similar. The roof, interior improvements, HVAC work and loading docks add another $100,000. The legal fees, appraisal costs, title insurance and financing costs add $50,000. The total cost is $950,000 or $47.50/s.f. A smart move as the cost of building a new facility would be $55/s.f. or about $1,100,000. Your lenders have appraised the building (as of completion and occupancy) at $1,000,000.
You obtain all approvals, a good general contractor and financing for 90% of your costs or $855,000 via the SBA 504 loan program as below:.
First lien mortgage: (local lender)
Amount: $475,000 (50%)
Rate: 6.00% fixed
Term: 10 years (balloon) but with two 5 year extension options
Amortization: based on 20 years
Monthly payment: $ 3,402.98 ($40,835.76 annually)
Second mortgage (SBA 504)
Amount: $380,000 (40%)
Rate: 4.75% fixed (very low for a second lien)
Term: 20 years
Amortization: 20 years self liquidating
Monthly payment: $ 2,455.75 ($29,469.00)
Initial Overall Rate: 5.44% is the effective initial blended interest rate of the combined loans
The combined annual debt service totals $ 70,304.76 which is equal to $3.52/s.f. of building area. Your 10% -$95,000 cash equity investment will save your company $ 1.48 /s.f. when compared with the $5.00/s.f. market rate.
Now let’s further assume the following:
- Your business is profitable.
- You move into the building and lease the entire building to your company for $4.75/s.f. fully net or $ 95,000/year.
- The $95,000 fully net rental income to you as owner covers the total annual debt service by 135 percent (1.35 times)
- You sub-lease 5,000 s.f. for $5.00/s.f. fully net which reduces your company’s net rent on the 15,000 s.f. it occupies to $70,000 or $4.67/s.f. per occupied area
- You picked up 5,000 more feet for your company and only increased your net cost by $20,000/year or $4.00/s.f.
- Your personal net income from the lease income after debt service but before depreciation, amortization and taxes is $ 24,696 or 25.9% on your $95,000 cash investment.
- During the first few years the depreciation allowance will virtually cover your $24,696 plus the amortization so that you pay little or possibly even no income tax on the $24,696. Check with an accountant about that and know that it will change in a few years.
- After you move into the building your company has annual sales of approximately $ 1,000,000 and an annual net income before depreciation and income taxes of approximately $ 75,000.
- You ultimately occupy all 20,000 s.f.
- Over the next 20 years you work hard to grow the business. Some years you will be successful and profits increase, but, there will be two or three national recessions that will cause sales and profits to fluctuate. You may even need to invest some additional dollars to carry the business through difficult periods but you make the investment back in better times.
- You were always able to pay the expenses necessary to operate and maintain the building and you were always able to make your mortgage payments
Now fast forward to 20 years from now:
- You want to sell the business
- Interest rates are higher than they were 20 years ago and inflation is also higher.
- You have no children or partners that want to take over running your business
- Your building is in good condition but for a variety of reasons it only appreciated by 30% over the 20 years to a current value of $ 1,300,000.
- Your business had an average annual “net profit” for the last 3 years of $150,000
- You have been able, during those years, to pay yourself a salary of $100,000
If you sell your business, because you are retiring and the buyer needs to find a new experienced CEO, the “Cap rate” is say 5 times net, indicating a price of $750,000. Depending upon your tax position, ordinary income or capital gains treatment and tax rates at that time you may only net about $ 600,000 after taxes or less. Let’s assume you can earn 10% on your $600,000 or $60,000 a year. This is less than your former salary and substantially less when company profits are added as well as the $24,696 you were getting from the building for a total annual taxable income $ 234,696. Hopefully along the way you were also able to build a retirement fund
However, you can also now sell the building or continue to own it and rent the building to the buyer of your business. If you sell, noting that you repaid the mortgages, depending upon your tax position, ordinary income or capital gains treatment and tax rates at that time you may only net about $1,040,000 after taxes or less. If you can invest it and earn say 10%, your additional taxable income will be $104,000 or a combined $164,000 still a lot less than you were making.
However, if you rent it then for a slight higher rate of say $6.00 s.f. fully net that would provide you with $120,000 a year because you have repaid the mortgages. Collectively that would also bring your taxable income to $180,000. While not really close to what you were making you are no longer having to work and you still own the building that you could re-mortgage and/oror sell at a later date affording excellent retirement flexibility.
There are other benefits:
- Never having to relocate, incur the disruption and associated expense
- Never losing the benefit of any advertising of your location because you had to move
This is just one example. Other variations exist. You can use this model to pencil in your own numbers but hopefully this demonstrates one example of the wisdom of buying your own building and using the SBA 504 program to do it.
Posted in Blog, Small Business | No Comments »
The Gourmet Truck Business
Tuesday, February 14th, 2012
By: Harris Eckstut
Co written by: Patrick O’Rourke, a restaurant operations specialist and teacher, one of the founders of the upcoming Philadelphia Mobile Foods Association.
Taking it to the streets:
In the world of business, there is more than just taking one’s passion and opening one’s business doors – or in this matter, opening the truck window.
The Gourmet Truck business is one of the hottest areas of growth in America. Take for example Quick Service Restaurant’s take on the Food Bicycle http://www.qsrmagazine.com/consumer-trends/food-bikes-could-be-hottest-new-trend?microsite=595+4113
While very popular in California and warm weather climates, Gourmet Trucks are now moving into the chillier climates. The new wave of high quality coming out of food trucks has brought upon us the great delights of talented young folks of all backgrounds finding their passion of putting food service on wheels.
With the growth of a new area of any industry, there are many new challenges created because of government enforcement of outdated codes of rules & regulations specific for different types of businesses, implementing funding and lending applications that don’t fit the new needs, marketing challenges, and many other aspects of business where square pegs are trying to be put into round holes.
Surprising Roadblocks:
At first one would think operating a food truck might be less expensive than a bricks & mortar restaurant. Oftentimes this is not true.
One example is that many health departments might not approve the gourmet food truck for use unless the business produces it’s food in a health department approved commercial kitchen – i.e. – bricks and mortar.
And since trucks are on wheels and park on streets, there are new governing bodies besides the business code department (L&I in Philadelphia) and the local health department that become involved including:
- the local streets department
- state motor vehicles
- local traffic police
- possibly state department of transportation, etc. etc., etc.
- If selling pre-packaged items produced by the operator, then there is the State Department of Agriculture and/or Federal agency or two.
And, I can almost guarantee there is no one out there in the governing agencies reaching out to other agencies in hopes of coordinating efforts to help the individual businesses find their way through the maze of laws, codes, rules, etc.
Worse, these regulating authorities are being guided in their enforcement by codes that were made long before business/liberal arts/culinary schools grads began to create and invent the newest of gourmet culinary concepts to travel and cook on wheels.
Where is the Map?
From these and many concerns not only by the business owners but also the public that follows its favorite “truckees” as well as agencies empowered to protect the public, Mobile Food Vendors Associations (a/k/a Food Truck Associations) are forming throughout the country.
In Philadelphia, The Philadelphia Mobile Food Truck Association – http://phillymfa.org/ is in its formative stages under the leadership of Dan Pennachietti of Lil Dan’s Food Truck and Andrew Gerson, of the soon-to-be Strada Pasta truck.
Since December the Association has been on the fast truck-track expecting its incorporation by the first week of March and by mid-Spring to be in full gear working. The Truckees and others associated in the gourmet mobile food industry will be leading the way in mediating issues of code enforcement and regulations, parking locations, communicating among the truckees with their loyal followers andwith regional event organizers, as well as promoting this new and exciting way of enjoying the streets of Philadelphia.
Posted in Blog, Restaurant Notes, Small Business | No Comments »
How to Control Liquor Costs
Monday, January 16th, 2012
By: Harris Eckstut
January 16, 2012
I am often asked from restaurateurs as well as restaurateur wannabes and investors and lenders, “How does one control the liquor costs in a restaurant?”
There are numerous answers:
The business can hire spotters to make sure the bartenders are pouring properly and are also putting the payments in the register and not “somewhere else,” and that when the server gets a drink from the bartender, he/she has a corresponding receipt from the POS system.
There are measuring standards with shot glasses, lines on the wine glasses, even automated pourers.
Another function of cost control is the appropriate pricing.
You can be watchful of everything your bartenders do with have the spotters, etc., etc. and still have high liquor costs. How? Simple: because the price you entered into the POS system is wrong. You got to make a regular check to make sure that this has not happened or there hasn’t been a glitch or otherwise where the pricing on the computer changed (by any which way) and that $6 glass of Guinness is 60¢!
Management needs to review that the drinks and wine are being priced properly and that the POS register system is programmed right – i.e. someone checks that the price was put in accurately and not “accidentally” changed.
We must understand, that when it comes to lack of honesty no matter in what walk of life there is the old maxim: “Where there is a will there is a way.”
One thing that is very hard to fool is the real “numbers” i.e. – how much was taken in revenues as compared to how much liquor used. Today’s computer systems make it a much simpler process. Count the inventory once a week. Subtract it from the previous week’s inventory then add the difference to your purchases and divide by your sales. There are no special tweaks, etc. Just plain old “figure out the product costs of selling alcoholic beverages.”
But even with the most sophisticated and detailed of accounting systems, one must understand that there can be a “way.” Most of a bartender and/or server’s income come from the customer “tips.” Good bartenders can make there tip income by having a good personality, looking good, paying attention to the customer, and giving old-fashioned good service. But, there is also the “other way” – “overpouring” – i.e. giving away the restaurant’s liquor to a friend/big-tipper. You ask, “but if the liquor costs are in line, how can the bartender be “stealing” the liquor for his/her friends?” Don’t necessarily be comforted with tight financial oversight. A classic way for a bartender to overpour at the bar for tips and still meet the budgeted cost controls is by “short-pouring” the dining room customer that isn’t tipping him. This will often cost the business an unhappy customer that will not only not return again but will tell dozens of her friends about how she got cheated on her drink while dining.
In the final analysis, or better still, “the moral of the story is:” a restaurateur controls the business’s liquor costs by ALWAYS being “WATCHFUL AND VIGILANT”!
Posted in Blog, Restaurant Notes | No Comments »
Larger SBA loans on the rise
Tuesday, January 10th, 2012
By Elaine Pofeldt of Crain’s New York Business
January 8, 2012
In one sign that the credit crunch is easing for small businesses, New York saw an uptick in large SBA-backed loans in fiscal 2011.
The biggest such loan was to M.C. Packaging Corp., a maker of cardboard products, for $12.6 million. It was one of seven deals that exceeded the size of 2010′s largest loan: a $7.9 million deal for Transit, a clothing retailer in Manhattan.
Pravina Raghavan, director of the U.S. Small Business Administration’s New York office, attributed the continued growth in large loans to the increased size limits authorized under the Small Business Jobs Act of 2010.
The amount the SBA was able to contribute to 504 loans—often used for real estate and construction—rose from $2 million to $5 million (and $5.5 million in certain cases, such as for manufacturers) under that law. Lenders including the Empire State Certified Development Corp., set up to promote business growth in the region, provided more funding on some deals.
Fiscal 2011′s lending activity points to a comeback in local industry, according to Ms. Raghavan. “There seem to be a lot more manufacturing plants coming up,” she said. And though Manhattan usually sees the most action, “some of the biggest deals went to Queens,” where some of the manufacturers are located, she noted. “Most are real estate deals,” she added.
The SBA, in conjunction with the Internal Revenue Service, will be promoting lending and tax incentives for small business in local workshops in the coming year. The most recent one was held in Staten Island in the fall of 2011. “It would be a good time now, if you’re thinking of becoming an entrepreneur, to look at financing and the resources available,” said Ms. Raghavan.
Read more: http://www.crainsnewyork.com/article/20120108/SMALLBIZ/301089984#ixzz1j4Ln3zcj
Posted in Blog, Economics, Small Business | No Comments »
Small Signs That Small Business Lending Is Up
Tuesday, January 10th, 2012
By ANGUS LOTEN, WSJ Writer
There are signs that more banks may be loosening the purse strings for small firms, as business conditions improve and as borrowers become more willing and able to take on debt.
Small-business lending hit a four-year high in November, according to the latest Thomson Reuters/PayNet lending index, for instance.
The total volume of small-business financing increased by 18% over the same period last year, and reached the highest level since Feb. 2008, its latest data show.
Fewer small firms were falling behind in loan repayments, with delinquencies of 30 days or more down five basis points to 1.5%, and “severe delinquencies” of more than 90 days down 1 basis point to 0.39%, according to the index.
Rohit Arora, chief executive of Biz2Credit, a small-business lending broker based in New York, says demand for loans from small firms is picking up as sales improve and businesses become more creditworthy.
But these are small signs at best. For some small firms, significant barriers to credit remain.
Bank of America Corp. is requiring some small-business owners to pay off their credit line balances in a lump sum, rather than monthly installments, or face higher interest rates – a move that appears to buck the industry-wide trend of easing access to credit for small firms.
According to this story in the Los Angeles Times on Monday, the move stems from a corporate overhaul launched by the bank’s new chief executive Brian Moynihan, who has promised to “address losses caused by loose lending and rapid expansion by reining in risks and shedding investments deemed non-core.”
Jefferson George, a Bank of America spokesman, told the Wall Street Journal Tuesday that the move impacted a “very, very, very small percentage” of small-business clients in a single lending portfolio that had lines of credit without maturity dates. More than 90% of those clients have since renegotiated terms with the bank, he said. The bank currently provides lines of credit to more than 1.5 million small businesses, he added.
Access to credit tightened dramatically for small firms in the wake of the financial market crisis and a plunging in housing values. A study by Pepperdine University found that more than 60% of small-business loan applications last year were denied.
According to the National Federation of Independent Business, a Washington, D.C.-based small business lobby group, most small-business owners have either foregone seeking investment capital from banks due to weak prospects for growth, or simply given up trying after being rejected multiple times.
One in five of more than 500 small firms recently surveyed by SurePayroll, a Chicago small-business payroll firm, said they were planning to borrow to grow their business in the months ahead.
Still, some caution that ongoing weaknesses in the housing market, along with uncertainties about the federal budget and the Euro zone crisis, among other issues, could derail any renewed optimism among borrowers and lenders alike in the coming year.
“If there’s too much uncertainty, no one will want to take the first step,” John Paglia, a small-business researcher at Pepperdine University, says of kick-starting the cycle of credit, spending and growth.
Fred Graziano, head of regional commercial banking, government banking and small business at TD Bank, says while loan demand from small firms is getting stronger, it won’t increase significantly until “there’s more of a predictable environment.”
Contact Angus Loten at angus.loten@wsj.com.
Posted in Blog, SBA Technical Issues, Small Business | No Comments »
Best Practices: Flood Insurance – Saving Your Guaranty for a Rainy Day
Wednesday, January 4th, 2012
By Timothy D’Lauro, Esq.
As most of us have seen over the last several years, Mother Nature can wreak havoc without warning or defense. Communities across the United States have been devastated by storms and resulting floods that have destroyed homes and businesses across the country. Undoubtedly, some of those homes and businesses were associated with SBA loans. Therefore, it is crucial for SBA Lenders to understand Flood Insurance and, when it needs to be obtained under the rules of SOP 50 10 5 (D).
Under SOP 50 10 5 (D), flood insurance must be obtained when any collateral is located in a special flood hazard area, or flood zone. SBA flood insurance requirements are based on determinations made by FEMA on the FEMA Form 81-93, Standard Flood Hazard Determination Form. In order to determine whether the collateral is in a flood zone, a search must be performed on the address or land parcel number, and the FEMA form will provide confirmation that the address or parcel number is either in a flood zone, or not. The National Flood Insurance Program (NFIP), a FEMA initiative, determines the requirements of when flood insurance is required by the federal government, and for our purposes, by the SBA.
While not previously addressed, in SOP 50 10 5 (D), the SBA sought to clarify its position regarding this requirement in relation to condominium and cooperative units. The SOP states that any requirements put forth by the NFIP apply with equal force to both condominium and cooperative units. Lenders must require the individual owner of the particular unit to obtain flood insurance for the unit, and the condominium or cooperative association to obtain insurance for the exterior of the entire building.
Under the NFIP, if any part of a building that is being used as collateral to secure the loan is located in a flood zone, the lender must require the Borrower to obtain flood insurance for the building. Failure to do so would almost certainly result in a repair or denial if the loan was to default as a result of a flood, or if flood damage resulted in a loss to the lender or SBA.
Similarly, if there is any tangible non real estate collateral, such as equipment, fixtures or inventory (“Personal Property Collateral”) located within a building that is in a flood zone, whether or not the building is collateral for the loan, the Lender must require the Borrower to obtain flood insurance for the Personal Property Collateral. There is little flexibility in this requirement, and once again, a failure to obtain the requisite insurance would most likely result in a repair or denial in the event of a flood.
The SBA does provide Lenders with some flexibility and the capability to make a business decision regarding flood insurance when the Personal Property Collateral is located in a building that is not collateral for the loan. The Lender may waive this requirement when the building is not collateral if the Lender uses prudent lending standards to determine that flood insurance was not economically feasible or not available, and includes a written justification explaining why the insurance was not economically feasible, or the steps they took to determine that it was not available. Lenders must be careful to properly document their file when choosing to waive this requirement, or will risk the guaranty.
Another consideration for the Lender is the amount of flood insurance that is needed. The SBA requires the amount of insurance obtained by the Borrower to be the lesser of the insurable value of the property or the maximum limit of available coverage ($500,000, per NFIP guidelines). The insurance coverage must also contain either a Mortgagee clause, or Lender’s Loss Payee clause, in favor of the Lender. These clauses must contain language that protects the Lender from any action or failure to act by the debtor or owner of the insured property that would invalidate the interest of the Lender. Any failure to obtain the proper insurance amount and the endorsements required by the SBA could result in a repair or denial of the guaranty.
It is important for Lenders to know what the SBA requires in order to protect the guaranty. An important part of protecting the guaranty is obtaining the proper insurance as required, and that includes knowing when flood insurance is required and what language must be included in the coverage to meet the requirements of the SOP 50 10 5 (D). Flood insurance is not just about protecting your collateral, it’s also about protecting your guaranty.
For more information regarding flood insurance and other SBA related due diligence matters, contact Tim at tdlauro@starfieldsmith.com or 215-542-7070.
Posted in Blog, SBA Technical Issues, Small Business | No Comments »
$2.5-Billion Small Business Innovation Research (SBIR) Program for Small R&D Firms Extended 6 Years
Wednesday, January 4th, 2012
By: Karen Mills, SBA Official
Tuesday, 01/03/2012 – 9:50am
Last week, President Obama signed a bill reauthorizing the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs for another six years. This long-term reauthorization is good news for the innovative small businesses that these programs support. SBIR and STTR invest about $2.5 billion a year in America’s most promising small research and development companies. Through SBIR and STTR, federal agencies with large R&D budgets provide competitive awards to help small businesses bring their best innovations from the drawing board to the marketplace. SBIR and STTR operate in three phases, providing support for research, development, and commercialization.
Over the years, SBIR and STTR have played a role in the growth of firms like Qualcomm, Symantec, and others. From 2002 to 2006, about 25% of R&D Magazine’s top 100 annual innovations came from companies that had received an SBIR grant at some point in their history.
Despite this track record, the future of SBIR and STTR had been subject to repeated short-term funding from Congress over the past ten years. This new, long-term reauthorization provides certainty and stability for the small businesses that leverage these programs to create jobs. In fact, it strengthens SBIR and STTR, proving more funding for small businesses to drive innovation, create jobs, and grow our economy. It increases the amount these programs can award to small businesses, shortens the timeline for award decisions, and improves the focus on commercializing the innovative products that will change the world.
SBIR and STTR are a win-win. Federal agencies are able to meet their R&D needs, while small businesses get the chance to bring their innovations into the marketplace. The reauthorization ensures that small businesses will have access to much needed investments. Money from these programs will go directly to small businesses to help them drive innovation, strengthen U.S. competitiveness, and create good jobs.
http://community.sba.gov/community/blogs/official-sba-news-and-views/open-business/25-billion-small-business-innovation-research-sbir-program-small-rd-fi
Posted in Blog, SBA Technical Issues, Small Business | No Comments »
The Miracle of the “Point of Sale” Register
Friday, December 2nd, 2011
By: Harris Eckstut, Restaurant Consulting
When the first “computer register”- what today we call a “point-of-sale” register system- first became available, I was ecstatic.
My ecstasy:
-A machine/computer/calculator would now price and total the customer’s checks!
I would no longer be dealing with the problems of servers putting down the right prices for the food and drink items ordered. I would not longer be dealing with the problems associated with them calculating the correct tax. And even more wonderful- the check would be totaled properly. This was truly “modern times”. These items alone made the purchase of the register a profitable investment.
There was additional value in this registers, not only with cash controls, but operations as well. Such as:
-The cook, including myself, could now read everyone’s handwriting!-No more of the impossible to read beautiful, floral cursive of the Catholic school girls.
-The servers became so much more efficient in their service to their customers that they could wait on up to 50% more customers, and they did a better job! (Better tips for them, better labor costs for me!)
-There would be no more of this classic inefficiency of service of giving the customer the bill:
After the customer asks for the check, the server runs into the back of the restaurant to look up the menu prices and then puts right-or possibly wrong- amounts onto the guest check and then totals them up on the adding machine (calculators had been invented, but were $100 and the batteries were always running low). Meanwhile, the server has neglected her other customers because she was so anxious about getting the prices right or not figuring out the 3% sales tax or adding up wrong because she would have to pay for the mistake that the owner’s grandmother would find while sitting in the back of the restaurant, like Madame DeFarge, on her adding machine.
-And the bartenders no longer had carte blanche to decide how much to charge each customer, at the bar or tables- for “well” or “top shelf” drinks. Inventory controls back then? Simple! Count the inventory dollars each week, total the purchases and divide by sales. And, if the liquor costs were too high for too long, it would be time to change bartenders. Forget about knowing if he was pouring single malt scotch and charging “well” scotch prices- or any other kind of brand name inventory controls.
With the ever-growing technology in POS register systems, we are ever increasingly reaching new milestones in cost controls, savings, and service.
In 1980, when one got a credit card for payment, the server and/or manager would run into the back and find this month’s bad credit card pamphlet to check to see if the card might have been stolen over a month ago; anything more recent and there was no information available. Then, if it didn’t have a matching number, sort of like your modern day checking of your lottery ticket numbers at the deli- you would insert the card on a credit card issued slider mechanism with a special multi-part paper that would imprint the name of the purchaser. (You always had to be sure you changed that date on the machine! And you could read the imprint of the name that was often worn our from extra use). The person would sign, and then the business owner would collect all of the week’s receipts, total them up, drive to the American Express office in Bala-Cynwyd, PA, wait for the clerk there to check the tickets, and then finally issue you a check that would take a week to “clear.”
Fast forward to today: now the server takes the card to the POS station which is on the dining room floor in an area for the server to watch all of her other tables and slides the credit card through the terminal itself which almost always gives immediate approval, so the server can bring it back to the customer who now is no longer late for the play, movie, meeting, or other special event. (And we restaurant owners get the table turned faster and our money in 24 hours!!!)
Accounting-wise, the POS is now feeding almost all the information for the business’s “general ledger.” Today, it is to the point that the once necessary 5 days a week bookkeeper has been reduced to the 3 hour a week bookkeeper. How much money is that worth? And what almost immeasurable additional value is there for eliminating many of the unavoidable human mistakes?
With this readily available info, today at our weekly manager meetings we can discuss weekly sales and costs – accurate ones! – as well as other vital information. So we can address problems in a timely – and oftentimes business saving – manner.
In reviewing business plans, I counsel lenders and investors to take special note to insure that there is a Point-Of-Sale register system in the operational plan and included in opening expenses. I give advice that the POS system is as vital a piece of restaurant equipment as a grill and dishwashing machine! – which reminds me: do you want to know what the restaurant business was like before the invention of the commercial dishwashing machine?
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