The information provided reflects our views at Misenplace and is here for educational purposes only; it should not be taken as professional financial advice.

As a restaurant operator, understanding the financials is a key element of success.

And healthy finances help businesses work toward their goals, deliver their vision and attract talent.

Usually, this area of the business remains at management level, and is partially shared with frontline workers, if at all.

But what if being more open could provide a significant boost to the whole organisation?

Financial transparency varies between organisations. Approaches range from sharing nothing internally (known as closed-book management) to sharing all financials freely (open-book management).

Each company should determine where they fall on this spectrum, but Misenplace believes that incorporating some elements from an open-book management style is beneficial for both your business and your team

To help you see whether this approach might be for your organisation, we’ll be outlining how to break down financial reports for sharing with team members - along with some of our top tips on what information is the most important to communicate, and how it can be shared most effectively.

Honey Butter Fried Chicken in Chicago is an excellent example - they have been operating an open book management system since they opened, with great success. “We had a fry cook come up with a whole new way of rotating fryer oil that saved us $500 a week” shared owner Josh Kulp. But, he elaborated, “it was something that no one could have come up with had they not been familiar with our expenses [...] because he was, he was motivated to come up with a solution.”

When we’re done, we hope you’ll have a more concrete idea of the What, When, How and Why of open financial management.

I - WHY: The benefits of sharing financial information with your team

Let’s begin, though, with a look at the tangible benefits of implementing this approach:

1) Increased accountability

Team members will be more invested in the performance of the restaurant and are more likely to take ownership of their actions and decisions, and the tasks they perform will have renewed importance to them.

2) Increased motivation and trust

In an article, business consultant Joy Maitland suggests that information sharing and involvement can help to promote trust between employees and their employer.

Teams under this approach are more likely to be motivated to work harder and improve their performance. They see themselves as an important part of the whole organisation.

3) Improved decision-making

A clearer grasp of the financial status of the restaurant means a team will be equipped to make well-informed choices that can improve its performance.

For instance, by observing the impact of a specific inventory item’s wastage on costs and profits, they may make better decisions when cooking with it.

4) Reduced staff turnover

A majority of restaurant employees lack stable career paths with livable wages and opportunities for growth, according to Henry Patterson, a restaurant consultant. This leads to high turnover and negatively impacts employee self-esteem, employer expenses, and guest experience. Implementing a finance training program can address these challenges and improve staff retention.

5) Overall, better financial management

Creating a two-way system of communication, where the team who experience the day to day ins and outs of the restaurant are able to discuss the finances and link them to anecdotal evidence.

By providing everyone with access to the same financial information, it's easier to track progress, identify potential issues and make informed decisions.

II - WHAT: A framework for sharing

To effectively communicate with team members, it is recommended for the company to establish and clearly communicate its own reporting framework. This framework should be based on three key principles:

1) Timeframe

Reports need to be looked at across different periods.

It’s important that everyone in the team understands this concept, and knows what system the company have in place for periodic reporting.

They need to know that every financial year is broken into ‘accounting cycles’ for ease of reporting, which can follow different formats:

• From the 1st to the last day of the year/month.
• 13 periods of 4 weeks (52 weeks).
• The 4/4/5 which is equal to 4 periods - 2x periods of 4 weeks and 1x 5 weeks (52 weeks).

(At Misenplace, we recommend using one of the last two methods, which allow organisations to compare like with like year on year).
Once the accounting cycle is defined, the business is able to look at their data through 4 lenses: year, period, week and day.

2) Types and depth of reports (Overall vs. Granular)

Sharing the correct metrics and amount of data with the team is crucial to ensuring you get the most out of a financially transparent approach, without overloading them.

We can break reports down into:

• Overall metric-based reports, which show broad data about the performance of the business as a whole
• Their granular counterparts, which can be used to dig into potential issues.

Here are the 5 most important overall reports to acknowledge and share, along with their granular counterparts.

1. Sales reports -> Product sales reports
2. Cost of Good Sold (CoGS): including Food and Beverages -> Food costing, Wastage reports, Stocktake reports…
3. Labour cost -> Daily timesheet
4. Inventory reports -> Stocktake reports comparing actual & theoretical (we will cover this momentarily)
5. Full P&L -> A simplified one taking into consideration Revenues & Prime costs only.

Each of these reports have specific purposes and everyone in the company should become familiar with them as part of their development and/or training program.

‍3) Comparison

Reports (actuals) take on the most significance when a comparison is provided with one or more of the following:

• Budget (goal) data
• Previous period/week/year data
• In the case of some metrics, theoretical data

Actual numbers on their own don’t mean much. Particularly when it comes to inventory and cost of sales reports, theoretical data plays an important role in helping team members contextualise and digest information. For example, seeing where wastage plays a role in cost inefficiencies.
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Comparison with budgets or previous data also gives a strong sense of overall performance and makes analysis much easier.

The team should be taught to pay attention to where comparison is being used to give a greater sense of financial understanding. Establishing a regular culture of discussing goals and budgets will also lay an important framework for easy comparative reporting.

Choosing which of these reports to share at a given time should be based on performance and budgeting/goals.

III - WHEN & HOW: to share financial data with your teams

Here are some suggestions for strategies with which to begin incorporating financial transparency into your management approach.

1) WHEN

In most companies, a summary of all the reports are sent weekly and periodically to upper management, with explanations and annotations focused on achievements and areas for improvement.

In an open-book management style, the same model for sharing financial information with front and back of house teams should be reflected.

On a weekly basis

A focus on key metrics for each specific department. This may differ for front and back of house teams.

Once the overall figures have been covered, the focus should be on small areas to improve as well as steps to be taken (perhaps a weekly goal). The front of house may be looking at average spend, net sales or number of customers, while the kitchen may be looking at wastage and stock levels.

On a periodic basis

The periodic reports should be longer and more formal, with more details that concern everyone in the team and require management-level decisions.

For example: The GP is down 2% due to a variance on Salmon.

OR

The number of bookings increased by 20% on weekends - how will this impact ordering?

Why? How can we overcome this?

Highlighting broader management issues to the team can help them be overcome more easily, as everyone understands and is a part of any changes implemented.

2) HOW

Reports should be shared on regular basis (ex: each Tuesday before 12 pm)

Making it a habit is the best way for everyone to understand the importance of using financials as part of their day-to-day job.

Reports could be shared via email or given in-hand.

Create a process to allow for debriefing and discussion

Once those reports have been shared, the organisation should make sure the team can debrief on them.

This could take different formats, including weekly / periodic meetings, or the creation of specific channels to discuss reports.

See our previous article for considerations on how to communicate well internally, particularly using digital platforms.

The importance of annotations

No matter what training you receive, data on its own can be difficult to read sometimes. Adding small comments to your reports to guide your team’s thinking and understanding could be a significant help.

Debriefs should focus mostly on areas to improve

The debriefs could start with an overview of the data, including a summary of general performance shown in each of the 5 overall reports.

Then, focus on the areas where the comparatives show the greatest variation (aka areas for improvement). Delve into more detail with the corresponding granular reports, such as Product sales or Stocktake.

Handling the information in this way will save time and also ensure that the amount of data given does not overwhelm or create anxiety in those who are more unfamiliar with financial data.

💡 Usually reports are written by someone from the management team, who has gathered data across different solutions. At Misenplace, we’ve recently launched our new Analytics module, and are working on improving the way we aggregate and share data across an organisation - get in touch for a demo of our analytics module.

Debriefs should be engaging, making sure everyone understands why certain data is being highlighted

Ask the team questions about the data, for example “What did we accomplish this month/period” “How does it compare to the budget, or to last month?” “How has x change affected the sales?” Keep the team interested and probe them to really take in the data.

Make debriefs interactive by connecting data to practical examples. This makes the information easy to understand and relevant to your team’s daily tasks, increasing their engagement and likelihood to implement changes.

Provide support

Its vital basic understanding of financial reporting and data form a small part of any training and development programmes for the staff.

Ultimately, organisation should be looking to discuss where, why and how each issue can be resolved. It is important reports include a balance of positive and negative figures, and always frame negative results as a discussion and lesson, to avoid demotivating team members.

Conclusion

At Misenplace, we believe that great communication coupled with an open-book management style is beneficial for business and for the team.

Simple actions can be taken to make this happen and it starts with

• Training your team members to understand basic financial information
• Sharing and debriefing about your finances regularly
• Most importantly, discussing how the day to day workings of your restaurant relate to those financials.

At Misenplace, we are on a mission to democratise data in the restaurant industry and make it comprehensible to everyone. Our new feature works towards automating the creation of simple, digestible reports with built in comparatives and variation calculations.

Got any questions? Contact us at contact@misenplace.ai