SMB Inventory Management From Two Restaurants

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The secret of good inventory control is matching supply with demand. Ideally, you would want to sell out of your last item as soon as demand for that item has dried up.

That’s why the story of Holeman & Finch Public House in the Buckhead neighborhood of Atlanta is such an interesting story. The restaurant serves – “teases” might be a better word – its customers only 20 burgers per day. The burgers have garnered rave reviews from sites like Yelp, where more than a few members have proclaimed it “the best burger in town, easily,” “probably the best burger I will ever have in my life” and other variations of that hyperbole.

The 10 p.m. Burger as it is called (the burgers go on sale at 10 p.m., but plan on them being sold out by 8:30) has become a metaphor among the locals for “that which is unattainable.”

This has certainly helped the restaurant gain a mystique about it, but if we’re talking about profit maximization and an efficient inventory control system, Holeman & Finch may not be an example to be followed.

On the flip side of the restaurant equation is Benihana. The highly successful chain was started in Japan in 1935. In the 60s, the company opened its first U.S. location in New York. By the end of that decade, Benihana had two locations in New York, one in Chicago one in San Francisco and one in Las Vegas.

In that time, Benihana grew from a small business to a huge chain employing hundreds of people. Even so, your small business can still learn a lot from this chain.

The chain has been praised for its extremely efficient inventory management, which has been enabled by a simple menu with few ingredients. This has helped the company reduce waste that comes when figuring out purchase orders for a menu featuring dozens of options.

The decreased waste has also allowed Benihana to achieve an average food cost that accounts for about 30-35 percent of all the company’s expenses. This compares favorably to the industry average, which sits around 38-48 percent.  That’s something like 10% profit that falls straight to the bottom line vs. the average restaurant.

While Holeman & Finch has successfully created a huge demand for their burger, thanks in large part to the mystique of the “20 per day” philosophy, that is certainly not a strategy to be emulated. Benihana, on the other hand, has provided some savory lessons for small businesses. The company’s limited menu has allowed them to achieve lower costs by lowering waste. Next time you’re considering your company’s future inventory management outlook, remember that a more focused product group with fewer possible variations on each product will mean less waste and lower risk of inaccurate inventory reorders.

Lower cost is a delicious consequence whether you’re in the mood for burgers or authentic Asian.