Responding to The Affordable Care Act With Cost-Cutting Measures

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The year 2014 has seen a significant change in the economic landscape with the rollout of the Affordable Care Act (also known as Obamacare). With this law, individuals and small to large businesses are required to enroll in a private insurance plan. The coverage will start on the beginning of the year 2014. Along with the mandated health insurance that resulted from the Affordable Care Act, there is also the possibility of increases in the minimum wage. This makes the food industry an even challenging prospect and further underlines the need for cost-cutting measures to stay competitive and profitable in the food industry.

Here are some cost-cutting measures that can implemented in response to the increased manpower costs:

1.       Be ACA-compliant. Even though the coverages of ACA are already in effect, you can still avoid heavy penalties by ensuring that your business has already complied with the law.

–          Determine your classification. Employers with 50 or more full-time employees (or the equivalent of the combined part-time employees) will need to get coverage for employees.

–          Review the makeup of your workforce. Determining the makeup of employees will help you know whether you meet the “50 or more” requirement. Full-time employees are defined as those who work for 30 hours or more weekly. The hours of part-time workers are added up and divided by 120 hours per month to compute the total “full-time employees” you have. Short-term employees and seasonal workers have a different way of reckoning.

–          Avoid penalties and qualify for tax credits. Being compliant will prevent you from getting heavy fines. There are also instances where a small business can qualify for tax credits to help meet the premiums for the coverage.

2.       Minimize shrinkage. Prevent loss through theft, carelessness and waste. Food wastage due to bad cooking, direct or indirect theft, overportioning, incomplete deliveries by vendors, items being thrown out because they are damaged are just some of the causes of shrinkage. Implement loss prevention strategies, especially when it comes to thwarting theft from employees who may be trying to smuggle expensive ingredients or restaurant dinnerware or flatware.
3.       Lower manpower costs with labor-saving equipment and processes. Let the machines cut down on the work your staff needs to do. Commercial dishwashers, food processors and cutters are some examples of labor-saving devices.
4.       Use energy-efficient restaurant equipment. Induction cookers save up on utility costs which can be quite significant given that energy costs have skyrocketed. You can also look for ways to save on energy with your refrigeration, lighting and HVAC system. This can also mean training your staff to be mindful about turning the lights off or adjusting the temperature of your equipment.
5.       Study the flow of your inventory. Make an evaluation of the flow of your inventory levels so that you order only the right amount plus a small extra buffer. You can prevent wastage due to loss or spoilage by practicing “just in time” inventory.
6.       Make a daily inventory of important ingredients. This will help you identify whether there is shrinkage. If it is too tedious to do this for all items, do it only for the major ingredients you use the most as well as expensive ingredients. At the beginning of the day, make an inventory, including additional deliveries that may be made during the day. At the end of the day’s operations, make another inventory and get the difference between the inventory at the start and end of the day. You can then make a comparison with the product usage report. This can help identify if you need to investigate any possible causes for shrinkage.
7.       Track food waste per staff member. There are some restaurants that provide each kitchen staff worker with a clear plastic box where they place any scraps they throw away. The kitchen manager regularly inspects this to see whether there is a significant portion of usable product that is being thrown away. Then, the manager can provide training once the cause for unnecessary wastage is identified (i.e. incorrect way prepping the ingredients).
8.       Manage your trash and trash disposal. The staff may unwittingly throw away expensive silverware and tableware in the trashcan located in the dish room– which can also eat up on your profits. In addition, do not allow staff members to throw out the garbage without prior approval from the manager. One favorite way of sneaking out expensive food items such as bottles of wines and choice cuts of meat is to stow this in the trash, to be retrieved at a later time. That is why having a CCTV camera on the dumpster area is also useful.

These are just some of the many ways restaurant owners can shave on costs, with the goal of improving profitability even in the face of the ACA and possible minimum wage increases.


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