The restaurant industry is experiencing the most difficult business climate in recent memory. When you combine food, fuel and labor, there’s not much room for error as each are going up at alarming rates.

What is causing food to rise so sharply? Is it all due to Mother Nature? Let’s have a look at corn production and the new corn consumption landscape. Our recent corn harvest yielded one of the largest supplies ever yet the price per bushel nearly doubled. The reason for this is due to the competition for corn on the world market. Our weakened dollar is sending a growing percentage of the crop oversees. Our fuel crises is sending more of the crop to ethanol refineries.

When this dynamic is combined with weather related events, we get the following:

- Corn feeds cattle, pigs and chickens. Combined with droughts in the Southeast, beef, pork and chicken rise sharply.

- Farmers plant more corn and less of everything else. Other produce rises sharply, including soy-based cooking oils. The price of flour has jumped 250%

The cost of fuel has added a punch as much of the food we enjoy is transported across the country and often imported from other countries. For an operator who delivers food, it’s a tripple-whammy: fuel surcharges on the food in the door, expensive fuel to cook and then deliver the food.

We can also count on the minimum wage to increase each year with recent legislation taking effect. In Colorado, this hit restaurants with large waitstaffs especially hard when compensation for tip-based employees nearly doubled on Jan 1 2008.

My recent posts have focused on using MVaaS to reduce your labor costs and food costs. Now that those are predictable and improving, focus on top line growth through new and repeat customer frequency. All storms come to an end and the survivors are those who employed the technology and discipline to guide them through.

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In my post yesterday, I introduced the subject of the Birthday Problem.  Did you try to guess at the answers?

For those of you previously unfamiliar with the Birthday Problem, I suspect that your guesses, unless you took pencil to paper, were rather inaccurate.  It is still surprising to me that you need only 23 randomly chosen people to have a greater than 50% chance that two people share a birthday.  And at 47 people you are at 95%.

Why is this important?  (excluding the pure profit producing potential by wagering with friends)

To me, the Birthday Problem illustrates the sometimes surprising results of probabilities.  It’s a cliche that “statistics can lie.”  This can be true.  But there are also important conclusions that can be inferred from the judicious extrapolation of data.  It just takes providing the proper tools and someone who knows what to do with them.

This is how I view MVaaS.  What is the probability that mistakes discovered at one location are repeated at the other locations?  What is the probability that corporate endorsed best practices are followed at all locations?

Would our guesses by any more accurate than they were for the Birthday Problem?

I absolutely love speaking with restaurant owners about the benefits of video surveillance. It helps that as a past owner myself, I understand exactly how video helps an operation. But help trim food costs?

Restaurant menus are thoughtfully constructed with food cost, gross profit and gross revenue in mind. The menu layout is designed to psychologically draw the eye to the most profitable items. Understanding the exact portion sizes of each menu item and exercising portion consistency in the kitchen are paramount to success.

What happens when portion consistency breaks down? Through the use of video I quickly realized that the Path of Least Resistency rules supreme. I saw an employee, I’ll call him “Skip”, top a pizza with cheese by hand as opposed to weighing the cheese on a scale first. Let’s do some quick math on the impact of just 1 extra ounce of cheese per pizza:

1 pound whole milk mozzarella – $2.35

1 ounce – $.147

3,000 pizzas per month @ $.147 = $441.00

What happens to your operation when exact portion controls are not adhered to? The entire cost structure of the menu breaks down, brand consistency suffers and ultimately profitability tanks.

How many “Skips” do you have in your operation? For about $5 per day, you can quickly find out.

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Have you heard?  Food prices have been increasing.

If this is news to you, to quote ’The Turk’ Sollozzo from The Godfather, ”Te salute, Don Corleone.”

If you are like everyone else, you’ve felt the increases in your wallet.  Now imagine the impact to a restaurant owner!

MVaaS providers have achieved initial success in several key markets.  Among those has been the restaurant space.  Derek Gale, Associate Editor of Restaurants and Institutions, provides insight in an article about the burgeoning video business in restaurants.

The main takeaways from Mr. Gale’s article:

1. The systems can pay for themselves in less than a year in theft and fraud avoidance;
2. The systems can be used to deliver effective and efficient service to enhance customer satisfaction.

These conclusions are consistent with the sentiments of our customers.  MVaaS should be viewed as a value creator, not a line item expense.  MVaaS, when properly utilized, is a valuable tool to combat loss and ensure customer satsifaction.

The headline quote has been attributed to baseball great Yogi Berra.  Although Yogi has said that “I never said half the things I really said”, this one sounds like pure 100% Yogi.

The plain truth is that Berra is probably better known for his colorful quotes than he is for his baseball prowess.  This is truly remarkable given his membership in the Baseball Hall of Fame!

The thing that made Yogi’s quotes remarkable was not that they were nonsensical.  If he merely spoke gibberish, his utterances would have been long ago forgotten.  So would he.  Instead it was his knack for misapplying common phrases that made him an original.

The headline quote is no exception.  Yogi was merely trying to use a cliche he’d heard before.  But he misapplied it as only he could.  Even so, you know what he intended to say, and he was right.

Business managers should listen to Yogi.  There is much to observe by just watching.  Make sure to take the time to do so.  And if you have dispersed locations, make sure you have the tools to do so, each day, every day.

Thank you for the reminder, Yogi!

As a Sales and Marketing Executive, I am constantly bombarded by email and offers from companies who want to “make my world better.”  To be honest, it is nice to be the customer once and awhile.  Recently, I received a pricing strategy document that, while a solicitation to consult with our company, was a great reminder that for many companies “pricing strategy” is often a point in time exercise and not generally positioned as a competitive weapon.  I have attached the link for your perusal .

http://managedvideoblog.com/AtengaTenPricingMistakes.pdf

The document offers a series of questions, processes and common mistakes companies make and explores how pricing, when done well, can protect firms from commoditization and help them extract additional value based on market perception of their products, not their own.  A good quick read and some great nuggets in there.

As a continuation of my prior posts (Part 1 and Part 2), I’ll begin with a personal experience.  I live within 5 miles of several Starbucks outlets.  On a pleasant Saturday morning, I decided to stop by one of them.  To my surprise, I was the only customer in the store – at 9:00AM.  This should have been prime time on a Saturday.  The store was staffed with four Starbucks employees, so the store managers were not expecting traffic to be slow.  Is this an example of an underperforming store that will be targeted to close?

Perhaps, but not based on my example.  I say this because while I was the only customer in the store, there were other customers.  They were just not physically in the store.  Rather they were in line at the drive-thru.

I bet that this is not the customer experience that Starbucks Chairman and CEO Howard Schultz had envisioned for me, or those customers in their cars.

In prior posts, Matt Steinfort has discussed the evolution of video, and Darren Loher has discussed the importance of turning data into useful information.  Certainly video is a valuable tool to assist an enterprise with security.  However, if you view this as its only use, you are severely underestimating its value to your company.

Armed with managed video, Starbucks managers would increase their understanding of what is happening everyday/all the time in locations they are unable to visit.  Utilizing motion-detection and POS search capabilities, they would have access to pertinent activities, turning data to information.  And using clip save and share technology, they would have the capability of sharing their learnings organization-wide.  

Most importantly, their efforts would be directed squarely on improving the experiences of their customers.

This sounds like something from which Starbucks, and other large dispersed organizations, could benefit!

I gave you all a short justification yesterday about why I am not in the hardware business. A very important aspect of software, especially software as a service is to provide for others to use your software in ways that you never intended.

One of the best, recent API success stories is the API at twitter. It provides a very easy paradigm for 3^rd parties to access twitter’s functionality. It is so good, that according to Biz Stone the Co-Founder of Twitter, the API generates 10 times the traffic to the site as the actual UI that they provide.

The most important aspect of this API is that is provides a way for anyone on the Internet to embed management of tweets in their app. This allows developers to use twitter in ways never imagined.

Another view point on the importance of APIs is provided by Brad Feld in his simply put: No API? You Suck.

So, Sony, if you had provided a little bit more flexibility in your firmware, my son wouldn’t be trying to hack a PSP with a soldering iron.

What would an API to a MVaaS – service provider look like? I’ll explore that in an upcoming series.

Previously I described the recent transformation process underway at Starbucks. 

You may have been asking “is this really necessary?”  As evidenced by references in pop culture, the ubiquitous Starbucks outlet is stuff of legend, and comedy.  Why would a company with so many locations need to remake itself?

Answer – a really depressed stock valuation.  SBUX was trading at nearly $38 per share in June 2006.  It is currently trading at around $18 per share.  This type of drop tends to get the attention of top brass.

Newton’s first law applies to physics, but Sir Isaac could just have well been theorizing about high finance.  When a stock has fallen so dramtically, something needs to be addressed.  If you fail to identify and correct the issue, and the stock price will continue in its current path.

Mr. Schultz recognized this, and his re-focus on the “customer experience” is central to his change agenda.  Let me suggest an ideal “external unbalanced force”…

Telecom Ramblings, a blog written by Rob Powell and a must read, has an excellent post about the evolving online video space.  This subject matter is certainly near and dear to us at MVaaS.

Perhaps one of our astute readers could appropriately add to the discussion…